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There is no gain saying the fact that agricultural development necessary for the overall economic development of any country.

Be it a developed or developing country, no nation can obtain economic development with neglect of her agricultural sector.

It should be realized that an agricultural sector is of utmost importance and performs a number of roles in the economic development of a country. Among the roles performed by agriculture in the economic development process of a nation includes the following:

  1. Provision of food for the teaming population;
  2. It provides employment opportunities for the labour force for instance, in Nigeria, it was estimated that before the oil boom about 80 product of the active population were engaged in the agricultural sector.
  3. It provides necessary raw materials for the industries thereby encouraging and necessitating rapid industrialization of the economy.
  4. It equally provides purchasing power and market for the various industrial products.
  5. It contribute meaningfully to the capital accumulation for the purpose of funding the industrial sector.

In view of the important roles or agriculture to the economic development of a nation, the developing countries should watch the danger of relying on mineral resources, which are wasting assets in pursuing industrialization goal or the neglect of their agricultural sector development.

Agriculture development and modernization is a necessary pre-requisite for a strong industrial bases. Ideally, industrialization and agricultural development should go hand in hand in order to sustain an effective balanced development. Nevertheless, under any circumstance, increasing agricultural products contributes positively to general development and it is one of the essential pre-requisite conditions that must be established before a take off into self-sustained economic development is achieved.

Despite the great role that the agricultural sector could play in transforming an economy, one is seriously worried when one looks at the declining performance of Nigerian agricultural sector during the late 60s and the present period. One obvious factor responsible for the neglect of the agricultural sector development is the discovery of petroleum as a new source of revenue base to be a substitute for agriculture. Thus the deteriorating performance of the agricultural sector manifested itself not only in the area of cash crops but also in food crops production. The rate of total agricultural production has substantially declined. The decline in the production of cash crops got to a point where many cash crops like groundnut  and palm oil that Nigeria has been previously exporting had to be imported to met the local demand, by 1975, however, unnmeable inflation, embarrassingly high food import bill and a decline in oil revenue revealed to us that this neglect of the agricultural sector was unreasonable  over reliance of a predominantly agricultural economy on importation of food is a grossly misallocation of foreign exchange equipments. These capital equipments could be more beneficial in the overall development of the economy.

A number of factors account for the poor state of agriculture in Nigeria and other developing countries. These problems are:

  1. Lack of effective and adequate credit facilities.
  2. Technological constraints such as the use of obsolete equipments.
  3. Inadequate marketing services.
  4. Infrastructural deficiencies such as lack of rural electrification extension services, existence of few access roads, inadequate health and educational facilities resulting in rural urban drift.
  5. Institutional constraints manifested in weak agricultural extension and research services.
  6. Lack of storage facilities.
  7. Poor land tenure system, which lead, to fragmentation of plots of land.

Perhaps, the most immediate problems of agricultural finance is little or no interest shown by financial institutions in extending credit to agriculture.

Having said that a well developed agricultural sector is of paramount importance of agriculture in the area of provision of food and employment opportunities for the working population of a country, it is pertinent for developing countries like Nigeria to clear all the problems mentioned above so that agriculture will be able to occupy its paramount and proper place in the economic development of these countries.


The importance of credit to agric-farmers to stimulate agricultural production cannot be over-emphasized. Since agricultural production shifts from traditional method to filling the soil with local tools to the use of machines, and seeds often provided by the farmers themselves to more modern method in which more of the inputs are of high yielding variety of crops as a result of research carried out by scientists, the provision of high yield and disease resistant crops for the farms makes it very difficult for the farmers’ savings in this developing part of the world to purchase these needed inputs for cash. A credit facility have to be provided from other sources to met up.

In Nigeria, it was estimated that about two-third of the working population own small sizes units and are engaged in essentially subsistence type of agriculture. But lack of credit is generally seen as a constraints on their effort to expand their farm and modernize their system to feed the teeming population. Hence, the government of Nigeria recognizing this constraints has made various attempts to provide credit to the agricultural sector over the past two decades, inspite of these attempts, agricultural has continued to decline relative to other sectors in its contributions to the Gross Domestic Products.

It is also alleged that the commercial banks operating in Nigeria were not interested in financing agriculture mostly because of its comparatively risky nature, the fact that a substantial proportion of the small-scale farmers are illiterate with little or no banking experience, which makes the processing of loans rather very difficult for them. Commercial banks also complained of internal and external constraints, of small-scale farmers insincerity in filling forms (provides wrong information of their failure to repay loans promptly.

This research work is aimed at finding out the authenticity of all these allegations and suggest ways of ameliorating these problems, i.e, this study sets out to access the role banks play in financing small-scale farmers. This is with the view to determining actual achievements of the banks in Ebonyi State.


The objectives of the study includes among other things.

  1. To evaluate the extent of involvement of the government in financing small-scale farming.
  2. To evaluate the performances of commercial banks in financing small-scale agriculture.
  3. To identify the problems encountered by commercial banks in financing small-scale agriculture and problems encountered by farmers in obtaining loan.
  4. To critically examine the problems of loan repayment, identify the reasons for loan defaults including the socio-economic factor that reduces the farmer’s ability to repay loans.
  5. Suggest ways of reproving credit delivery to small-scale farmers by banks.


 The agricultural sector contributions to the national economic product have been on the decline for some time now. This leads to a total collapse in agricultural export and even on the provision of foods to the populace.

Agriculture like other business sectors cannot be carried out effectively unless adequate fund is available. Comprehensive review of financial problems facing agricultural sector is therefore essential. Such review will enable the sector to face the ever-increasing demand upon it. This study becomes move important since it is not only looks into the acquisition of loan but also proper utilization of the loan by small-scale agriculturists. It is in view of this that the federal government in its 1996 budget laid emphasis on making food available to the whole populace through proper funding of the agricultural sector.

It is common allegation that commercial banks are reluctant in financing small-scale agriculture because of high cost and risks associated with such lending. The verification of the authenticity of this allegation, which forms part of this study, makes the study all the more justifiable.

This will also help he banks to know the problems faced by farmers and therefore help the government amend some existing lending policies and formulate new ones where necessary in order to reduce the suffering faced by farmers. This will serve as a starting point to further the researchers on this issue as well as provide data for planning purposes.


This study covers the performance of commercial banks in the financial of small-scale agriculture. Also considered in this study were the problems face by both commercial banks and farms in the granting and collection of credit, the problem of loan default and reasons for default. Comparison was also made of banks performance with the other sources of finance available to small-scale farmer.

Due to time and financial constraints, this study is limited to Ebonyi State of Nigeria and the local farmers interviewed are from Mgbowo in Awgu Local Government Area. Also the unresponding attitude of some of the farmers and improper record keeping makes this work to be limited.


  1. Agriculture: This covers the science or practice of cultivating the land and rearing of animal. It refers to all the activities that utilizes factors of production (land, labour, and capital) in the establishment and management of farms for the production of food and cash crops like vegetable, Rice, bananas, yam, cassava, palm oil etc. it also includes livestock farming such as sheep, cattle, goat, pig and fishing.
  2. COMMERCIAL BANKS: These are companies which are registered under the banking ordinance and which carry out business of commercial banking with a view to making profit. It can be Limited Liability Company or public liability company. Such businesses primarily includes:
    • Receiving money and collecting drafts from customers on the understanding that the bank will refund the money so collected either with or without definite future date agreed upon between the bank and customers.
    • Advancing part of such money so collected to some other customers on the understanding that such customers’ money so advanced will be refunded with interest to the bank either on demand or at some definite date agreed between the bank and the customers.
  1. SMALL-SCALE FARMER: A small-scale farmer is one whose unit of farm is limited to 28 acres of land. He invariably requires small fund to run the farm with simple tools and a limited force. In Nigeria, the small-scale farmer is characterized by his low productivity lack of access to logistics support and inputs. The per capital income of an average Nigerian small-scale farmer ranges from N150 to N200 per annum.


  1. Abe, S: Nigeria Farmers and their Finance Problems Proceedings of Seminar Organized By Central bank of Nigeria April 27-30 1981 pg. 108.
  2. Ahmed, A: The Role of Banks in Achieving a Self-Reliant Economy, Business Times, Monday Dec. 1988 p. 5.
  3. Asabia, S.D: Financial Institutions and Agricultural Financing, The Role of Commercial Banks in M.O. Ojo and 2 others, Proceedings of Seminar by Central Bank of Nigeria, 1981 p. 402.
  4. Falaso, O: Introduction to Banking , Ibadan Evans Brothers (Nigeria Publication) Ltd. 1982, pp. 265-266.
  5. Golley, J.P: Banks As a tool for Agricultural Development, Business Times, Money, March 1985. p.24.
  6. Ijere, M.O: New Perspective in Financing Nigerian Agricultural, Enugu Forth Dimension Publishers Ltd. 1986.
  7. Agricultural Credit Guarantee Scheme Fund Annual Report 31st December, 1979.

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