ABSTRACT
The study assessed the performance of some selected Non-Governmental Organizations assisted by Partners for Development (PFG) in agricultural micro-credit utilization in Benue State. Data were collected from 100 purposively selected beneficiaries of the micro-credit schemes among five NGOs in the study area. The instrument for data collection were the structured questionnaire and the secondary data. Data were analyzed using descriptive and inferential statistics. The descriptive statistics used include frequency and percentage while inferential statistics were correlation analysis. The result of the study indicates that majority (60%) of the respondents were from economically active age (20-30) years with most fifty percent (50%) of them having tertiary educational qualification with agricultural (farming) as their major occupation. The study revealed that most twenty two percent (22%) of the respondents indicated that the loan was not adequate for their small-scale business. Forty six percent (46%) indicated that the loan was not provided at the right time. The result also revealed that most sixty eight percent (68%) of the respondents were able to solve other problems other than the main activities. The study also revealed that most seventy three percent (73%) of the respondents indicated that the problem faced in the utilization of credit was high interest rate. The result showed no correlation between the volume of loan/credit received and the income of the respondents. So the null hypotheses which state that there is no relationship between the volume of loan/credit collected and the income of the respondents is accepted at 0.05 level of significant. The study recommended that more agencies (National and International) should assist in providing loan or credit to rural farmers in order for them to improve their agricultural production and that finance institutions that are found in the state level should make provision for concrete implementation in favour of micro-credit delivery to the rural poor farmers. More so, financing institutions should promote the understanding of lending through viable co-operative groups. This is because, from the result of this study, the level of loan repayment among the beneficiaries has been high. Other lending institutions should focus on co-operative groups and if possible, have intermediaries.
1.0 INTRODUCTION
1.1 Background of the Study
Microfinance is one of the few market- based scale-able anti-poverty solutions. Microfinance refers to providing access to financial services to poor households in rural and urban areas. To most, microfinance is the provision of very small loans (micro credit) to help the poor to invest in or scale up their small business (micro enterprise). Over a period, microfinance evolved a broader range of services like credit, savings, insurance, payment services, money transfer, health care, education and recently in some countries consumer protection. This is because providers have realized that the poor who lack access to traditional formal financial institutions require a variety of financial products (Udoka, 2008).
Also, because of the recognition of microfinance, the United Nation Organization celebrated the year 2005 as a year of micro-credit (Kpakol, 2005). As a result, this financing instrument (microfinance) is perceived worldwide as a very effective means against hunger and poverty mainly in developing countries. The practice of micro-credit is culturally rooted as it dates back several centuries (Central Bank of Nigeria, 2005). The traditional micro-credit institutions provide access to credit for the rural and urban low-income earners. They are mainly of the informal Self Help Groups (SHGs) or the Rotating Savings and Credit Associations (ROSCAs) types (CBN, 2005). Other providers of micro-credit include savings collectors and co-operative societies.
The informal financial institutions generally have limited outreach due primarily to paucity of loanable funds. Therefore, in order to enhance the flow of financial service to Nigerian rural areas, Government has in the past initiated a series of publicly-financed micro or rural credit programs and policies targeted at the poor with the mandate of providing financial services to alleviate poverty (CBN, 2005). The latest of such program is the National Poverty Eradication Program (NAPEP) (CBN, 2005).
Also, micro-credit services, especially those sponsored by Government have adopted the traditional supply-led subsidized credit approach basically directed at the agricultural sector and non-farm activities such as trading, tailoring, weaving, blacksmithing, agro-processing, and transportation. These services resulted in an increase level of credit disbursement and gains in agricultural production and other activities, the effect were short-lived due to the unsustainable nature of the programs. Since the 1980s, Non- Governmental Organizations (NGOs) have emerged in Nigeria to champion the cause of the micro and rural entrepreneurs, with a shift from the supply-led approach to a demand-driven strategy. They have increased significantly in recent times due largely to the inability of the formal financial sector to provide the services needed by the low income groups and the poor, and also the declining support from development partners among others.
The Non-Governmental Organizations obtain their funds from grants, fees, interest on European Journal of Business and Management loans and contributions from members. However, they have limited outreach due largely to unsustainable
sources of funds (CBN, 2005).In recent times, Microfinance institutions (credit plus services) have evolve in Nigeria with the aim of making these services available to a larger percentage of the poor in both the urban and rural areas of the country. The Central Bank of Nigeria started licensing microfinance banks since 1999, their aim being the provision of microfinance services to low income groups with the sole aim of alleviating poverty (CBN, 2005). Microfinance banks were set up in order to address the problem of weak capital base of community banks, the existence of huge un-served market, economic empowerment of the poor, employment generation and increase savings opportunity so as to alleviate poverty in Nigeria (Dahiru and Zubair, 2008).
Nigeria with a population of about 150 million and GDP per capita of N641 in 2006, two-thirds of the citizens are still poor despite the existence of microfinance institutions in the country (Dahiru and Zubair, 2008). Nigeria has the third highest number of the poor in the world (UNDP, 2006). Microfinance institutions have not been able to reach the greater number of the poor as it serves less than 1 million people out of the 40 million potential people that need the service (CBN, 2005). Also, the aggregate micro credit facility account for about 0.2 percent of GDP and less one percent of the total credit to the economy (Dahiru and Zubair, 2008). Equally, according to Anyanwu (2004), the interest rate in the microfinance institutions are much higher than the prevailing rates in the banks. This ranges between 32%-48%, when banks are charging between 19.5% and 21.6%, while moneylenders charge interest rate of 100% or more (Anyanwu, 2004).
Also, in 2010, the Central Bank of Nigeria (CBN) revoked the operating license of 224 microfinance banks for failure to honour their obligations to depositors (NTA, 2010). N18.2 billion of depositor money was trapped in the bank according to CBN (Daily Trust, 2010). This shows that some of the microfinance institutions are not financially healthy. How can a poor institution bring out the poor out of perpetual poverty? Microfinance is created in response to the missing credit market for the poor. This is because the conventional financial sector has not been able to take care of the low income groups and the poor. Micro-credit could be obtained through the informal financial institutions. Non-Governmental Organizations have also emerged to increase the cause of microfinance though their outreach was limited due to unsustainable sources of funds. In developing countries (Nigeria inclusive), Governments are also incorporating microfinance in their strategies towards achieving the millennium development goals that involve halving poverty by the target date which is2015.
This made the central bank of Nigeria (CBN) to start licensing the formal microfinance banks in 1999.Given the complex nature of poverty together with the current microfinance intermediation approach, it is becoming difficult to judge whether microfinance should be advocated as a means of poverty alleviation. This is because some microfinance institutions are not financially healthy, their liability far outweigh their assets. They are equally struggling to get out of poverty, indeed many of them were declared bankrupt in 2010 (Osuala, 2011). Rural dwellers need agricultural credit at reasonable terms to invest in their various businesses. This will increase their earnings, capacity and consequently their standard of living (Osuala, 2011). Reports show that the financial outlay is an integral part of any business and as a result adequate capital is important in agricultural production and that most farmers have not been able to accumulate capital because they have been trapped in the viscous circle of low output, low income, low savings and investment. The real essence of agricultural micro-credit is that, it enables farmers to take advantage of new technology in the form of machines, improved seeds, fertilizers, insecticides, herbicides, storage facilities, effective and efficient labour. Micro-credit is equally important in agricultural development because it generally enables idle resource to be tapped and adequately utilized; provided that the attitude of rural farmers and consumption pattern actually encourages the use of the resources. There is no doubt that improving the lot of rural farmers is a sure way to improving the socio-economic life, health and living standard of the people. The surest way of doing this is by extending micro-credit to needy farmers to establish or expand already existing agricultural businesses. Credit to rural farmers could be another way in which the marketing systems could be made to operate efficiently. With adequate credit, post-harvest prices depression could be avoided and the rural people could be placed in a better bargaining position (Osuala, 2011). According to Johnson and Rogarly (2003), partners for development in 2002 expanded geographically into Nassarawa and Bauchi states, and sectorally into public health and agriculture.
The agricultural support program which is funded by the United States Department of Agriculture (USDA) is being implemented in Benue State through Partners For Development (PFD) program that are increasing the income of farming households through the provision of micro-credit for various agricultural enterprise/activities and feeders, roads improvement for easy transportation of agricultural output to market seems to be gaining more ground. A Partner for Development (P.F.D) is a private American non-profit organization currently managing self-helped overseas programs in Cambodia, Nigeria, Tanzania and Bosnia and Herzegovina. The mission of the PFD is to work with local communities’ often in remote or conflict locations in activities that develop skills and improve standards of living and in a manner such that local partners help design, implement and assess programs to the greatest degree possible. The basic criterion used to achieve the above mission has no restriction to race, religion, non-ethnicity, age and sex. Apart from the agricultural sector, PFD works also in the public health, clean water supply, household economy and food security sectors (Alufohai, 2006).
The basic criterion used to achieve the above mission has no restriction to race, religion, non-ethnicity, age and sex. Apart from the agricultural sector, PFD works also in the public health, clean water supply, household economy and food security sectors (Alufohai, 2006). PFD’s approach is to operate from a community base and to collaborate with local counterparts. To ensure local ownership of program and sustainability, local partners are involved in the design, implementation and assessment of programs. This on turn leads to skill development in key areas, especially; training local health care providers in preventing and treatment of primary health care problems, providing technical support in start-up and support of small enterprises, promoting growth and enhanced capabilities of many partners non-governmental organization (NGOs) locally (Alufohai, 2006).
1.2 Statement of the Problem
Agriculture has a lot of resource, which makes it to remain a key sector in a developing country like Nigeria. This is particularly due to relatively abundant land and labour resources. The contribution of agriculture to Nigeria includes the provision of gainful employment, provision of capital, increasing foreign exchange earnings and improved rural welfare. In Benue State and Makurdi in particular, small holder producers are presently dominant and produce the bulk of the food, fiber and cash crops for the country. About 80 percent of the present farm populations are small holder producers who farm less than one hectare. Farmers barely grow enough to eat and sell for income in order to improve their standard of living. Most of them lived in that thatched houses, earn low income, attain low level of education and are generally exposed to very limited opportunities and profitable market facilities. Considering the centrality and important role agriculture play in the lives of these people, various non-governmental agencies and some financial institutions have tried to offer aid packages and programs design to help in agricultural production but positive impact of these have not been seen in the lives of the rural farmers. One wonders whether the failure is due to the improper timing of the aid or an inaccurate estimation of the amount needed by the rural farmers or the inconvenient repayment terms. It is in view of these that the research is designed to assess the performance of NGOs in the provision and utilization of micro-credit loans to small holder producers and under the auspices of the Partners for Development (PFD) initiative in the study area.
1.3. Research Questions.
i. What are the volumes of micro-credit given to beneficiaries?
ii. What are the repayment of loans by beneficiaries before and after micro-credit scheme;
iii. What are the values of economic activities of beneficiaries before and after micro-credit schemes?
iv. What are the incomes of beneficiaries before and after micro-credit schemes?
v. What are the problems encountered in the utilization of credit by beneficiaries?
1.4. Objectives of the Study
The broad objective of this study is to access the performance of NGOs in micro-credit delivery to poor rural dwellers in Makurdi Local Government area of Benue State. The specific objectives of the study is to:
i. determine the socio-economic characteristics of the respondents in the study area;
ii. determine the volumes of micro-credit given to beneficiaries in the study area;
iii. determine the repayment of loans by beneficiaries before and after micro-credit scheme in the study area;
iv. determine the values of economic activities of beneficiaries before and after micro-credit schemes;
v. determine the incomes of beneficiaries before and after micro-credit schemes in the study area; and
vi. determine the problems encountered in the utilization of credit by beneficiaries in the study area;
1.5 Statement of Hypothesis
Based on the specific objectives of this study, the following hypothesis were empirically stated and tested:
H0: There is no significant relationship between volume of loan received and the income of the beneficiaries.
1.6 Significance of the Study
The findings of this research are expected to guide extension workers, research stations and Governments in planning for effective micro-credit scheme for sustainable agricultural production. The results of this study would also provide baseline information for further research and policy formulation in agriculture and rural development that will help rural farmers attain improve income and better standard of living. To the policy makers, it is hoped that the findings of this study will expose the need for proper monitoring and implementations of their policies.
In the same vein the policy makers will also see the need to involve the farmers in policy making and not just making the policy without knowing the farmer’s needs. The involvement of the rural farmers in the policy decision making will help the policy makers to know the existing gap between the urban and rural farmers in terms of their access to the policies that are on ground for the enhancement of their productivity. To the researchers in related fields, it will serve as a reference tool for further research in these areas. This means the findings will expose them to more areas that are yet to be covered. It is hoped that this study will be of great help to the understanding of the NGOs in Makurdi Local Government area of Benue State.
1.7 Scope and Limitation of the Study
The scope of this study is Makurdi Local Government Area of Benue State and is limited to the performance of Non-Governmental Organizations in Agricultural Micro-Credit Utilization in Makurdi Local Government Area of Benue State.
1.8 Operational Definition of Terms
Agriculture: According to Rubenstein (2003), Agriculture is the deliberate effort to modify a portion of earth’s surface through the cultivation of crops and raising of livestock’s for sustenance of economic gain.
Agricultural-credit refers to the several vehicles used to finance agricultural transactions, including loans, notes, bills of exchange and bankers’ acceptances.
Extensionists: professionals that influence adoption decision in a direction deemed necessary by a change agency.
Rural dwellers: are those subsistence farmers that employ traditional methods and traditional tools. He and his peers have been categorized as "partial economic men" because of their duality in goal attainment (Williams, 2000).
Awareness: this refers to the individual/farmer know about the existence of the new innovation but lack details information about it.
A Non-Governmental Organization (NGO) is any non-profit, voluntary citizens’ group which is organized on a local, national or international level for common interest.
Credit is the ability of a customer to obtain goods or services before payment based on the trust that payment will be made in the future.
