Determinants of informal credit delinquency among food crop farmers in rural niger delta of Nigeria

Abstract

The study examined the determinants of informal credit delinquencies among food crop farmers in rural Niger Delta of Nigeria using Akwa Ibom State as a case study. A multi-stage random sampling technique was adopted to select 96 beneficiaries and structured questionnaires as well as personal interview were used to collect data. Probit and logit models were used to analyse the factors influencing credit delinquency among food crop farmers in the state. Result of the descriptive analysis of the socioeconomic characteristic of respondents revealed that 93% of male and 72% of female food crop farmers had one form of formal education ranging from primary to tertiary education. Empirical result from the Probit and logit models were similar and showed that borrower's non-farm income, credit amount received, household size, net farm profit and farm size are determinants of credit delinquencies among food crop farmers in Akwa Ibom state. The study also discovered that the probability of food crop farmers being credit delinquent is about 0.427 ceteris paribus. It is recommended that food crop farmers should form marketing cooperative societies as a means of generating additional income to augment loan obtained. Furthermore, local government authorities should set up credit programmes that should focus on soft loans to rural farmers at a subsidize interest rate.

Determinants of demand and supply of microcredit among fish farmers in Osun State

“…Farmers with high incomes are also more likely to receive credit facilities from lenders since they have a better likelihood of repaying the loan. This result is in agreement with Nto (2006), Nwaru et al (2008), andEssien (2009) who reported a positive and significant relationship between credit demand and farm income. The coefficient of the age of farmers was positive and statistically significant.…”

“…The negative effect of interest rate indicates that a credit scheme with a higher interest rate lowers the probability of farmers' demand for microcredit and vice versa. This is in agreement with the finding of Nwaru (2004), Essien (2009) and Nwaru et al (2011), Ibrahim andAliero (2012), Ololade and Olagunju (2013), Assogba et al (2017), and Mwonge and Naho (2022). Also, from the law of demand, the higher the price of a loan charged (that is, high-interest rate), the lower the credit demand.…”

“…In other words, informal lenders will adjust their credit supply upward in response to a higher level of liquidity. This result is in line with Tra and Lensink (2004) and Essien (2009) who indicated that informal lenders readily disburse credit to prospective borrowers based on the level of their liquidity. The coefficient of years of experience in lending was positive and significant.…”

“…This implies that years of experience in lending have a direct relationship with credit supply. This is in line with studies from Essien (2009) and Nwaru et al (2011), who found that the length of time a lender has been active in lending may help the lender avoid or minimize problems that arise from lending. The length of time a lender has been actively involved in lending may be a sign of the practical experience he has amassed on how to efficiently resolve lending-related issues.…”

Challenges and Prospects of Commercial Bank Loan Extended to Farmers in Lagelu Local Government of Oyo State, Nigeria

“…Recommendations such as timely disbursement of loan by banks, less burdensome administrative procedures in loan acquisition as well as development and implementation of cassava friendly loan packages were made among others. Also, Essien et al (2016) farmers in rural Niger Delta of Nigeria using Akwa Ibom State as a case study. Empirical result from the probit and logit models were similar and showed that borrower's non-farm income, credit amount received, household size, net farm profit and farm size are determinants of credit delinquencies among food crop farmers in Akwa Ibom state.…”