This study was carried out to analyze credit security to small-scale farmers in Gboko Local Government Area of Benue State. This study seeks to examine the level of credit awareness, acquisition and utilization of small-scale farmers in the study area, to describe the socio economic characteristics of the farmers, identify the constraints to credit awareness, acquisition and utilization, to identify the type and source of credit institutions in the study area as well as determine the factors influencing the farmer’s awareness, acquisition and utilization of credit. Data for the study was collected from a sample size of 120 respondents who are farmers from the study area.17 council wards were in the area but only 12 council wards were randomly selected. Making up a total of 120 respondents sample size. The data was analyzed using descriptive statistics (percentages and frequencies) and inferential statistics (Probit regression) was used to determine the factors influencing credit awareness, acquisition and utilization among farmers in the study area. The study revealed major factors influencing credit awareness, acquisition and utilization average family size, age, educational level etc.  significant at ≤ 0.10 level of probability.





1.1     Background of the Study

Agriculture is a major contributor to Nigeria’s GDP and small farmers play a role in contributing to agricultural development in the country by practicing agricultural activities (Raji and Fakoyode, 2009).

In Nigeria, several programmes are implemented to support agricultural guarantee sector such as Agricultural Bank Guarantee Scheme aimed at enhancing the availability  of credit   to rural populace especially farmers at affordable cost. However, the programmes have at one time been influenced by political considerations hence they recorded little success (Aliero, 2009).

The productivity and growth of agriculture in recent times have been hindered by some factors as some of the programmes identified as responsible for performance in the development of Africa’s financial markets included in excessive controls, ineffective supervision and death of qualified manpower (World bank, 1999)

Rural farmers often have to plough back their profit (if any) or rely on informal village money lenders to source finance which in turn  be used to pay for services to the to the productivity factors employed in the course of farming  activities. Farming is virtually peasant in nature in Nigeria. Commercial agriculture is largely absent in the areas, this is partly because most people dwelling in rural areas are poor, characterized by lo w income, large family size , lack of adequate formal education, low savings and investment, lack of access to credit facilities and use of crude implements. As a result, poor economic base, hardship, poor living standards, joblessness, high death rate characterised in rural areas (Olayide et al, 1980).About two-third of Nigerians are said to be poor, 80% of whom are living in rural areas, they pathetically feel dissatisfied with their present living conditions (Badayi, 2002).

As reported by Baba Sanya et al (2008), over 80% 0f the total agricultural produce is derived from subsistence farming activities at the same time, the rural farmers are not paid enough for their produce whereas price for basic farming tools and other essential inputs are constantly rising beyond their reach.

Nigeria’s agriculture is predominantly peasant and small scale farmers as it is dominated by small scale farmer who actually account for the build-up of the Nation’s agricultural output. The credit profitability arising from productivity is one major problem in investment which discourages farmers in Nigerian agriculture. Most farmers cannot accumulate capital as a result of their low margin in savings. This is true especially of peasant farmer s whose lack of capital seems to be a crucial factor affecting their income.

As noted by Okorji (1990), the continued participation in agricultural project by any farmer depends basically on income at his disposal. He further stated that the need of credit by small scale farmers is evident in enhancing agricultural development.     Agricultural production requires adequate financial support to improve production status. The socio-economic and cultural life of the people have direct link with farming as the main source of food and income. Farmers are therefore affected by the type of saving strategies and the mode of flow of credit among them.

The decline in agricultural productivity and standard of living of various household have been a long standing issue in Nigeria and it requires a sound policy that will create financial mechanisms, so that the average and the particularly the poor can participate fully.

In recent times, the productivity and growth of agriculture has been hindered by limited access to credit facilities (Odoemenem and Obinne, 2010).

As noted by EFInA (2008), 23 per cent of the adult population in Nigeria have access to formal financial institution, 24 per cent to informal financial services while 53 per cent are financially excluded. Agricultural credit is important for sustainable agricultural development to be achieved in any country of the world.  Rural credit has proven to be a powerful instrument against poverty reduction and agricultural development in rural areas. Farmers are particularly in need of such instrument (i.e. credit) because of the seasonable pattern of their activities and the uncertainty they are faced with.

The evolving role of credit in agriculture development and strengthening of the rural economy in a country cannot be overemphasized. It is not a surprise why the credit and agricultural sector are closely tied together (Todaro, 2006). Thus, credit has the potential to create employment than traditional industrial development (Longhurt, 1991).

Obiyan (2000), conceived credit as a major input in production and that due to its significant and crucial characteristics, is usually treated as a separate entity from other inputs of production.  He further stated that availability of credit help to increase production and productivity at farm level which may lead to higher income and consequently lead to enhanced standard of living of the rural populace.

Awora (2004), viewed credit a s a viable tool in any economic development strategy. Similarly Ezike, Nwibo and Ngozi (2009), conceived credit facility as having the potential of contributing to the general economic development thereby increasing the output of rural populace and also ancillary occupations of rural sectors. The above authors further maintained that credit utilized under proper conditions may lead to increased productive power and provide the means for future economic growth.

Mbam (2009), in recognition of the importance and crucial role of credit in agricultural development, cited Ijere (1998), who asserted that a country caught up with the difficult situation of vicious cycles of poverty but acquire mainly an injection (credit) to activate the system rather  than other factors of production such as land, labour, or management.   

The above author described as necessary ingredient in the various aspects of farmers operation, Findings from different scholars has it that most of the Nigerian farmers operate on subsistence level due to lack of funds and other factors of production (Nnadozie and Ibe, 2002). But then issues of who provide the credit does not account so as much as they are made accessible and available at an adequate and moderate interest rate and on time too (Nwosu,2000).

          Accordingly, Elizabeth (2004) also opined that access to credit facility is a means to empower the poor and provide a valuable to assist the economic development process. Yunus (2004) was of the opinion that any credit invested in an income generating enterprise (agriculture) as working capital or for productive asset can lead to establishment of a new enterprise or the growth of the existing one. He indicated that that profit from the enterprise provide income and service as a good income source of a developing economy. Thus credit is made available for housing and start-up of a new enterprise and for purchase of agricultural input and rural development, one of the reasons for the decline in the contributions of agriculture to the economy is lack of formal national credit policy and paucity of credit institution which can assist in agricultural development (Olagunju and Ajiboye, 2010).

          In the developing countries, the role of agricultural credit is credit is closely related to providing need resources which farmers cannot source from their own available capital. In respect of this, the provision of agricultural credit has become one of the most important government activities in the promotion of agricultural development in Nigeria (Olagunju and Adeyemo, 2008). Credit is viewed just as important as the factors of production and it facilitates production process in serving means to inputs (Rahji, 2000).

          Despite the importance of credit to farmers, they still face some challenges in the acquisition of its which make most of them to get discouraged and relent in their effort to contribute to the productivity of farm produce.

          Low income level of rural farmers stem from fluctuating uncertainties in demand of agricultural output as well as the rising costs of agricultural inputs, compelling rural farmers to operate purely on subsistence level with low investment as a result of low productivity and low income (Beck, Levine and Loayza, 2000). It has been argued by IPAR (2007), that lack of market information and therefore inadequate access to finance by the rural poor in developing countries is one of the main reasons why people remain poor. It is in this regard that Burgess and Pande (2003) argued that access to finance is critical to enable the poor to transform their production system and thus exit poverty. Access to finance through credit assists the poor not only to smoothen their consumption but also to put their assets which enhance their productive capacity (IPAR, 2007).

          The importance of credit in agricultural enterprise development and sustainability has prompted the Federal Government of Nigeria to establish credit scheme such as the Agricultural Credit Guarantee Scheme and Agricultural Support Scheme  to ensure farmers to ensure farmers access to agricultural credit though the situation has not improved substantially, based on the 2006 core welfare indicators questionnaire survey, it is estimated that only 18 per cent of farm house holds (mainly small scale farmers) have access to financial services  (Akramov, 2009).

Nigeria’s agriculture and agriculture production requires adequate financial investment to reap maximum output. Over the years, a large number of public credit institutions have been established to finance small scale industries and agricultural enterprises in Nigeria while some of these credit institutions were designed to fund both the industrial and agricultural sector of the economy. Others were specifically set up for agricultural financing. Efforts have been made by various governments to diversify the economy, policies have been initiated and committee’s setup but the seemingly good initiatives have been marred by little commitment from government. Farmers are therefore affected by the type of saving strategy and the mode of flow of credit among them.

          For the agricultural sector, the efforts of making good agricultural policies through schemes, programmes and institutions, however have not been able to be backed up with adequate budgetary allocation and financing coupled with corruption in the execution of the policies as reported by Adekoya (2011).

According to Adekoya (2011), with several uncertainties such as inadequate funding, resource scarcity, heightened risks, climate change, higher energy prices, demand for bio-fuels and doubts about the speed of technical progress, the future of the agricultural sector of the nation’s economy remains gloomy.

          In situations where funds are available, the higher interest charged on bank loans, banks lopsided method of disbursing credits, poor policy implementation and paucity of funds have been identified as some of the critical challenges facing the country’s farmers. Due to peculiarities of the agricultural sector like the long station periods for agricultural production, risks and uncertainties from natural causes and the predominance of small  producers with little asset base and working capital, the sector has continued to receive less attention. Having access to credit from banks by small scale farmers is critical for stimulating innovations in agriculture and increase in food production.

                   Farm credit is an important means of improving capital investment in the agricultural sector to fulfil its expected role (Chidubele and Ezike, 1995). It is important in easing seasonal fluctuation in rural household increased promoting commercialization of farm enterprise and breaking the vicious circle of poverty among rural farming populace.

Despite the importance of credit to farmers in Nigeria and Benue state in particular farmers still face some challenges in acquisition of it to contribute to the productivity of agriculture. Most small scale farmers are poor. Therefore they need credit to help improve their capital, output and income. Credit is regarded as a major factor in agricultural development and lack of it is usually given as an explanation for problems facing the agricultural sector in developing countries especially with the absence of the agricultural bank. It is on this that this study tends to analyse the credit security to small scale farmers in the study area.



1.2     Problem of the Study

Inadequate credit security to small scale is generally recognised as an important constraint in expanding food production and modernising agriculture especially among the rural populace. Small scale farmers require credit to be able to acquire important farm inputs such as fertilizers, agro chemicals, improved varieties and farming equipment and pay hired labour. It is evident that many attempts which have been made in Nigeria from 1973 until now to make credit accessible to small scale farmers were with limited effects (Mobayo, 1989).

          A large number of credit institutions have been established like Agricultural Credit Guarantee Scheme (ACGE). Nigeria Agricultural Cooperative and Rural Development Bank (NARDB) to cover some portion of losses incurred when borrowers default on credit in order to encourage credit to farmers all no avail.

          In spite of all the strategies, few farmers are having access to agricultural credit provided by the scheme. Agricultural credit facilities under the schemes are not easily secured, agreements to be executed by lending institutions are not properly spelled out for the farmers and constraining difficulties in accessing credit.

          Therefore answers to the following questions are relevant to this study in Gboko local government area of Benue state.

  1. What is the level of awareness, acquisition and utilisation of credit in the study area?
  2. What are the socio economic characteristics of small scale farmers in the study area?
  3. What are the constraints encountered in credit awareness, acquisition and utilisation by small scale farmers in the study area?
  4. What are the type and source of credit institutions in the study area?
  5. What are the factors that influence credit awareness, acquisition and utilisation by small scale farmers in the study area?

1.3     Objective of the Study

The broad objective of this study is to analyse the credit security to small scale farmers in Gboko local government area of Benue state.

Specific objectives are:

  1. Examine the level of credit awareness, acquisition and utilisation access to small scale farmers in the study area
  2. Describe the socio economic characteristics of the small scale farmers in the study area.
  3. Identify the constraints to credit awareness, acquisition and utilisation to small scale farmers in the study area.
  4. Identify the type and source of credit institutions in the study area.
  5. Determine the factors that influence credit awareness, acquisition and utilisation in the study area


1.4   Justification for the study

This study on credit security to small scale farmers will be of benefit to the continual efficient performance or contributions of the credit institutions and most importantly to the small scale farmers. This is because the credit institutions will be able to know and ascertain the period of credit distribution to farmers and to identify and regulate the posing challenges by farmers in credit awareness, acquisition and utilisation, on the other hand the small scale farmers will be in position to secure the amount of credit available for each period, it’s adequacy with a view for looking for other sources of funds for supplementary purposes. It will also guide them on how to tackle the various agricultural credit financing problems facing them.

It will help the policy makers in formulating policies that would include and affect the rural agriculture in the processes of production as well as to efficiently disburse credit to small scale farmers.

          To the economy at large, this study will be of good help since agricultural production is a major contribution to the Nations GDP, it will enable federal and state government in formulating future agricultural credit policies.