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PROJECT TOPIC- Loan Repayment Performance of Farmers Under the Small Holder Agricultural Scheme of the Agricultural Bank in Enugu State

PROJECT TOPIC- Loan Repayment Performance of Farmers Under the Small Holder Agricultural Scheme of the Agricultural Bank in Enugu State



1.1 Background Information

The agricultural sector occupies a strategic position in the development of any nation. As such, the development of this sector becomes very important. In Nigeria today, there is a growing emphasis on the need for rapid development of the agricultural sector of the economy in order to break the vicious circle of poverty which is prevalent among the small scale farmers. In order for Nigeria to cut down its increasing food import bills, the only short-run option is to encourage smallholder farmers to improve and increase their food production.

Most of smallholder farmers are poor; therefore they need credit to help them 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. Agricultural credit refers specifically to the process of obtaining control over the use of money, goods and services, in exchange for a promise to pay back at future date (Adeyeye and Dittoh,2005).

 According to Lee et al(2006),credit is important and necessary in nearly all commercial farm business. It is a unique resource since it provided the opportunity for additional input and capital now and to pay the cost from future earnings. So, the potential to improve farm should be of the exterminating factors in the decision of whether or not to use credit. Credit contributes to the improvement of net income in several ways such as to maintain an adequate farm size, increase efficiency and adjust to changing economic conditions.

There are many sources from which our small holder farmers get credit for their agricultural or farming business. They are grouped into “formal” and “informal” sources. They later (informal) comprises of all credit obtained through the following, social clubs, friends, family, etc. The formal or non-indigenous credit institution is foreign and their operations have recognized standard practice. They are: – the bank, non-bank financial intermediaries and development banks like in agricultural bank.  Others are the cooperative society, supervised agricultural credit scheme of the ministry of agriculture etc. The agricultural bank is a bank set up by the government to solve financial problems of smallholder farmers in Nigeria with the responsibility of providing credit to farmers. For the fact that the agricultural bank and other sources of credit are existing, small holder farmers have been able to achieve the following: – farmers are now very efficient in the utilization of basic productive resources available to them.

The potentialities of land, capital, and water and management resource will soon be effectively utilized for optimum production. Nigerian farmers now make significant and important contribution to national products, but the second major achievement of farmers is that of raising productivity to a high significant percentage of potential output. The farmers are the main producers of more than 88% of the food consumed in Nigeria with the exception of some products (Olayide, 2007 and David et al, 2008)

Farmers are now able to produce enough food in quantity and quality to feed the increasing population of the country. The ageing farmers’ population, rising rural-urban rift, makes this achievement more difficult; declining farms and creating problems of agrarian revolution and farm modernization. Having the knowledge that all the farmers are efficient in the use of basic production resources available to them despite the small nature of holding, enhancing his accessibility to agricultural bank source of credit will therefore, be of immense importance to him in further increasing and improving on his or her yield, through the adoption of new technology and livestock breeds. Indigenous agricultural products are now very popular in other countries and all other parts of the world.

PROJECT TOPIC- Loan Repayment Performance of Farmers Under the Small Holder Agricultural Scheme of the Agricultural Bank in Enugu State

1.2 Problem Statement

Farm credit is an important means of improving capital investment in the agricultural sector to fulfill its expected role (Chidubelu and Ezike 1995) it is important in easing seasonal fluctuations in rural household incomes, promoting commercialization of farm enterprises and breaking the vicious circle of poverty among rural farming populace. According to Osakwe and Ojo (1980), farm credit according to CBN report (1981), the only way to develop agriculture to achieve the self-sufficiency in food production is to invest massively in the sector.

Government response to this situation led to the establishment of the Agricultural Banks (AB) and other formal institutions who disburse agricultural credit to small holders farmers but it seems that most of the loans disbursed to the farmers are not repaid as at when due. It is on this that the study tends to evaluate the loan repayment performance of smallholders farmers under the scheme of Agricultural Bank with a view to finding a solution to them.

Therefore answers to these questions are relevant to this study. What are the socio-economic characteristics of the respondents? Do the socioeconomic characteristics of the farmers affect their repayment ability? How much of the agricultural loan was disbursed to farmers within the year under review? What percentage of the actual Agricultural Bank was disbursed for a given period (2000-2010) as at when due? Is there any significant difference between the amount disbursed and that repaid within the year under review? Do farmers utilize the loan disbursed to them for the intended and stipulated purpose? What factors influences and contains farmer in the repayment of loan in the area?

1.3  Objectives of the Study

The broad objective of the study is to evaluate the loan repayment performance of farmers under the smallholder Agricultural scheme of the Agricultural Bank in Enugu State.

Specifically the objectives are to:-

  1. describe the socio-economic characteristics of farmers’ beneficiaries;
  2. evaluate the amount of loan disbursed in relation to the amount repaid within 10 years (2000-2010);

iii.    determine the effects of socio-economic characteristics of the farmers on the amount of loan repaid;

  1. analyze the factors that influence the repayment of agricultural loan by farmers in the study area; and
  2. identify the problems affecting the repayment capacities of the farmers.


1.4  Hypotheses

Two null hypotheses were tested. These include:

Ho1: Socio-economic characteristics of the farmers have no significance effect on the amount of loan repaid.

Ho2: There is no significant difference between the amount of loan borrowed and the amount repaid.

1.5  Justification for the Study

This study will be an immeasurable benefit to the continual efficient performance or contributions of the Agricultural Bank and most importantly to the smallholder farmers. This is because, the Agricultural Bank will be able to know and ascertain the period of loan recovery and the rate of loan default on the other hand, the small holder farmers will be in a position to estimate the amount of credit available for each period, it’s adequacy with a view for looking for other sources of fund for supplementary purpose.

It will also guide them on to tackle the various agricultural credit financing problems facing them. To the economy at large, this study will be good help since agricultural production has in the needs urgent attention it will help the federal and state government in formulating future agricultural credit policies.

PROJECT TOPIC- Loan Repayment Performance of Farmers Under the Small Holder Agricultural Scheme of the Agricultural Bank in Enugu State


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