THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURE (A CASE STUDY OF UDI, AWGU, EZIAGU AND ENUGU SOUTH)
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Table of contentCHAPTER ONE
1.0 INTRODUCTION OF THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURAL
1.1 Statement of problems
1.2 Purpose of the study
1.3 Significance of the study
1.4 Statement of hypothesis
1.5 Scope and limitation of the study
1.6 Definition of terms
2.0LITERATURE REVIEW OF THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURAL
2.1 Significance of small farmers
2.2 Source of finance
2.3 Uses of finance
2.4 Role of commercial banks
2.5 Factors affecting the distribution of credit to farmers
2.6 Repayment performance in credit programme
2.7 Problems associated with agriculture itself.
3.0 RESEARCH DESIGN AND METHODOLOGY OF THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURAL
3.1 Sampling procedure
3.2 Data collection
3.3 Questionnaires design
3.4 Statistical treatment.
5.0 SUMMARY FINDING CONCLUSION AND RECOMMENDATION OF THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURAL
SUMMARIES OF FINDING, CONCLUTION AND RECOMMENDATIONSUMMARY OF FINDINGS
Having usefully completed the reseach work on the role of commercial banks in financing small scale agricultural in selected areas of enugu agricultural zone (UDI. AWGU, EZIAGU AND ENUGU SOUTH ). The analysis of agriculture carried out through a survey of 100 farmers in enugu zone, it was possible to identify different aspects of small scale farmers capital acquisition, among which are
(i) type of farming and size of farm plot about 63% farmers in enugu agricultural zone are food crop farmers, while 27% are livestock farmers and 10% are tree crop farmers. The majority of this farmers also have farm size of not more than three hectares (63%). 29% and 8% of the farmers have farm plots of 4-7 hectares and 8-10 hectares respectively.
(ii) Amount of capital, it was observed that majority of the farmers invested amount ranging from N1001 – N10, 000(49%). This low capital investment maybe attributed to the fact that majority of the farmers depends on their personal savings for their farm operations.
(iii) Source of capital
Source of small scale agricultural finance are mainly the following:-
(i) Personal capital
(ii) Commercial banks
(iii) Nigerian agricultural credit banks (NACB).
(iv) Ministry of agriculture and national resources (MANR).
(v) Co-operative societies.
(vi) Isusu club.
(vii) Friends and relation.
The farmers depend on mainly informal source for their credit. Co-operative societies were the more sources accounting for 48.4% of the total. NACB, second with 16.1% where as commercial banks and friend and relation came third with 77% each ministry of agriculture and natural Resources (MANR) and co-operative banks came fourth with 6.5% while isusu club provided 3.1%.
(iv) Conditions for loan
Out of 76 respondents who did not use loan were discouraged by lack of properties to pledge ,while 26.3% were discouraged by high interest rate and 5.3% did not have money to bribe the bank officials and 7.9% did not have banking facilities in their village. The influence of collateral requirements on the demand for bank loan was tested and the analysis showed that farmers in the Enugu agricultural zone were not induced to borrow from commercial banks by the type of collateral requirements. (see hypothesis 2). None of the farmers interview were willing to obtain loan at interest higher than 23% majority of them (55%) would prefer interest rate not more than 5% though about 28% still preferred interest rates between 6-11%. The preference for low interest rate could be as a result of farmers inability to breakeven and added burden of interest rate would increase loan default which the farmers might not want.
As a result of stringent condition for loan from commercial banks, it was observed that only 38 respondents representing 38%of the farmers in the study area had ever applied for commercial bank loan.
In addition, as a result of farmers not being able to meet there condition of loan acquisitions from commercial banks only 2 represents 14% of the number that applied for these loans were successful.
(v) Supervision and Recovery,
Supervision of loan by commercial banks was found to be low, because the study revealed that 33% of the respondents that received commercial bank loans were not supervised. The 67% that were supervised a good number of the respondents stated that there were supervision only when they defaulted in their loan repayment. This inadequate supervision may be linked with lack of qualified personnel’s.
Analysis of repayment showed that 78% repay their loan in time and the test of hypothesis on rate of loan defaulting infecting that farmers in enugu agricultural zone do not have high rate of loans default.
About 81% of respondents who were not able to repay their loans when they fall due attributed it to poor harvest. The central banks record on this issue also stated that genuine cases of loan default arose from lack of proper management and supervision, high cost and low quality of feeds and inadequate working capita.
The analysis of data colleted enable the researcher to conclude that small scale farmers consume most of their crops remaining small quality they sell to meet other needs.
It is because of the collateral requirement that is making the small scale farmers not to apply for loan, and also when they think of their constraints they will encounter in their farming activities like poor harvest high interest rate which may leaded them not to repay back and in time.
When the farmers considers what it will involve them before they will obtain loan, in most cases they prefer to borrow from the informal sources like co-operatives, friends and relatives that will charge less interest on the loan or nothing to
The following recommendation was relevant and they includes;
1. Since it has been determined from the study the interest rate charge on the loan influences therefore interest rate should be set at a minimum level that will encourage farmers demanded for loan and at the same time encourage credit institutions to co-operate with central bank and rural banks to respond more to the needs of agricultural financing.
2. The government will help organize annual agric show at both state and local government level and representation of the state in national international agric trade and food fair where other rural farmers will be invited to come and observe.
3. The government will help in providing extension service to the farmers to improve their production and standard of living.
4. The commercial banks will help by providing new farm equipment to the farmers to hire at a cheap rate, thereby making farming easy for them.
5. Some banks that grant loan to small scale farmers will try and always visit the farmers farm for supervision. In doing so, it will help the farmers to be hardworking.
6. The government will help the farmers to insure their farm against damages.
7. The state government will also create avenue where they will distribute improved seeding to small scale farmer, This will help since some of the farmers has no money to buy the improved verity from the market garden.