Socioeconomic Determinants of Small-Scale Crop Farmers' Access to Loan in Benue State, Nigeria

MATERIALS AND METHODS

Study area: The study was conducted in Benue State by December, 2022 when the crop farmers were harvesting their produce from the farm. Benue State lies in the North-Central Nigeria between longitude 6°35'E and 8°10'E of the Greenwich Meridian and latitude 6°30'N and 8°10'N of the Equator at an elevation of 97 m above sea level in Southern Guinea Savannah Agro-ecological Zone. Benue State shares boundaries with Enugu State to the Southeast, Cross-River State to the South, Nasarawa State to the North, Taraba State to the East and Kogi State to the West. It also shares a common boundary with the Republic of Cameroon in the South-Eastern part of Nigeria. The population is predominantly agrarian with most of them actively involved in the farming of rice, yam, beniseed, sorghum, melon, cassava, cowpea and maize¹⁹.

Population and sample size selection: The population for the study includes all small-scale crop farmers in Benue State. For easy of agricultural extension services, the state was divided into three Agricultural Zones-Northern, Central and Eastern Zones with headquarters at Gboko, Otukpo and Adikpo, respectively. With the help of the Zonal Agricultural Officers, a multi-stage sampling technique was used for sample selection. In the 1st stage, the entire three agricultural zones were selected purposively. In the 2nd stage, four extension blocks were purposively selected from each zone while, in 3rd stage 5 cells were purposively selected from each of the twelve agricultural extension blocks. Finally, in the 4th stage, 5 farmers were randomly selected from each of the 60 cells giving a total of 300 small-scale farmers (3 zones×4 blocks×5 cells×5 farmers = 300). The blocks and cells were purposively selected because of security challenges in the state.

Methods of data collection: Both primary and secondary data were collected for the study. The data were collected using a semi-structured questionnaire. The Benue State agricultural development programme (ADP) staff were used as enumerators because of language and security challenges. A total of 300 questionnaires were administered across the three zones in the state. The researcher trained the enumerators on the objectives of the study and mobilized them for the job.

Statement of hypothesis:
H01 : The socio-economic characteristics of farmers do not significantly affect access to loan

H02 : There is no significant difference in the amount of loan requested by the farmers and the amount granted

Statistical analysis
Model specification: In line with Saqib et al.²⁰ a logistic regression model was used to determine factors influencing crop farmers’ access to loan. The model is similar to a linear regression model but used where the dependent variable is dichotomous. Let Y_i be a random variable (dichotomous) then, Y_i takes the value 0 or 1. Here, 0 denotes non-access to loan by the small-scale crop farmers while 1 denotes access to loan. The logistic model indicates that the probability of an event (Y = 1) given the value X_i...X_n is:

(1)

Taking logarithm of both sides of the equation, we have:

RESULTS AND DISCUSSION

Socio-demographic variables influencing farmers’ access to loans in Benue state: The Likelihood Ratio (262.06) and Chi-square value (14.62) indicated that the model fitted the dataset well because the overall model is statistically significant (p<0.05) (Table 1). From the model’s summary, a Nagelkerke R square of 7.9% implied that 7.9% of the variance in accessing a loan was explained by all variables studied.

Among the variables predicted to influence small-scale farmers’ access to loans, ownership of a bank account had a positive and significant (p<0.05) effect on the likelihood of accessing a loan. Ownership of a bank account increased the odds of accessing a loan by a factor of 2.016. On the other hand, gender, marital status, household size, years of farming experience, educational status, farm size and age did not significantly (p>0.05) affect farmers’ access to loans. This disagrees with the findings of Oludayo and Mbina²¹ which showed that gender, marital status, household size, farming experience and level of education positively affected farmers’ access to loans.

Differences between amount of loan requested and granted to farmers in Benue State: An independent t-test was conducted to compare the amount of loan requested and granted to the farmers. There was a significant difference in the mean loan requested (mean = 246650.94, Sd = 273823.65) and granted (mean = 171933.96, Sd =149329.560) to the farmers. This suggests that there was a significant reduction in the amount of loan granted to farmers when requests were made. This difference amounts to 74,716.98 (30.2%) when computed. This finding was corroborated by Anigbogu et al.²², who showed that a significant difference existed between the amount of loan applied for and disbursed by microfinance banks to cooperative farmers. There is, therefore, the need to bridge the gap between the amount of loan applied for and granted to farmer in order to allow for continuous productivity and improvement in the farmers’ living standard. Furthermore, this also justified the finding that small-scale farmers were granted lower amounts of loan than they applied for²³.

Sources of Loan by the Farmers in Benue: All the possible sources of loan as shown in Table 2 were explored by the farmers in Benue State but the dominant source of loan was cooperative societies (9.0%). This supports the finding of Abraham²⁴ which showed that access to financial services by using formal financial institutions and farmer savings clubs benefited vulnerable farmers especially women. The percentage of farmers that accessed loan through microfinance and commercial banks were 6.7% and 0.3%, respectively. Majority (81.6%) of the farmers did not respond to this question probably because of the frustrations they encountered over the years in accessing loan from these sources.

Farmers’ challenges in accessing loan in Benue State: The major challenges encountered by farmers in Benue State is long loan procedure (38.7%) and inadequate loan information (15.0%), lack of collateral (14.6%) and high interest rate (12.3%) as shown in Table 3. This finding was similar to that of Bigsten et al.²⁵ and Asogwa et al.²⁶, who observed that a lack of collateral requirements hindered the farmers from accessing loans. While high-interest rate heightens farmers’ fear of uncertainty, provision of collateral further discourages them from applying for a loan. This implies that the solutions to the challenges in loan acquisition in Benue State involves non-request for collateral by passing the loan through cooperative societies, provision of adequate loan information and simplified loan procedure. Most farmers lack the patience and time required for the bureaucratic procedures involved in loan application. Hence, adjusting the lending terms, conditions and making micro finance banks more responsive to the needs of farmers in rural areas will greatly enhance access to loan²⁷.

Farmers’ ownership and types of bank account in Benue State: About 50% of the farmers in Benue State owned bank accounts (Table 4). Of this number, 40.7% had savings account while (8.6%) had current accounts. Half (50.0%) did not respond to the question probability because they did not have any form of account. The result showed a lesser ownership of bank account by farmers in Benue State. Since ownership of account was a significant factor in accessing loan, it therefore, showed that only farmers who had bank accounts accessed loan in the state.

CONCLUSION

In Nigeria, evidence from literature revealed that one of the challenges influencing farmers’ productivity, especially small-scale farmers, was poor access to loan. In view of this, the study assessed small-scale crop farmers’ access to loan in Benue State. The finding suggested that some socio-economic characteristics of the farmers could be used to predict access to loan in the study area. The paper, therefore, recommends that similar studies should be conducted in other areas since farmers’ behaviour and socio-economic attributes are dynamic in nature.

SIGNIFICANCE STATEMENT

The aim of the study is to determine if the socio-economic characteristics of small-scale crop farmers in Benue State, Nigeria significantly influenced their access to loan. Findings showed that, among the variables (gender, educational status, farm size, marital status, household size, age, years of farming experience and ownership of bank account) predicted to influence access to loan, only ownership of bank account was statistically significant (p<0.05). However, it should be noted that other variables also influenced the farmers’ access to loan but not at 5% probability level. The paper concluded that access to loan by the small-scale farmers was poor because the average loan requested was significantly higher than what was granted. The negative implication of this is that there may not be expansion in the farmers’ production possibility boundaries since loan is needed to purchase or acquire other inputs in the production process.