Analysis of Sources and Socio-Economic Determinants of Acccess to Loan by Smallscale Rice Farmers in Gwagwalada Area Council, Federal Capital Territory, Nigeria

Abstract

This study evaluated the analysis of sources and socio-economic determinants of access to loan by smallscale rice farmers in Gwagwalada Area Council, Federal Capital Territory, Nigeria. Multi-stage sampling technique was adopted and used. Data were collected through the use of well-structured questionnaires administered to 100 sampled smallscale rice farmers. The following analytical tools were used to achieve the stated objectives: descriptive statistics, gross margin analysis, financial analysis, Cobb-Douglas Production Function, and Probit Model Analysis. The results of the analysis of the socio-economic characteristics of the respondents revealed that the mean age of the sampled small scale rice farmers was 43 years. This implies that smallscale rice farmers are mostly young and energetic farmers that are in the range of productive age. About 34% could not access formal education and 62% of the farmers had formal education and they can adopt new innovations quickly and also understands the guidelines involved in accessing formal loans. Most of the sampled smallscale rice farmers had less than 2 hectares of farm size. Also, 69% of the farmers had their capital through their personal savings, while 21% through credit borrow. The average loan accessed from formal sources by smallscale rice farmers was N200,754.2 with the maximum interest rate of 36% charged. The average amount of loan accessed from informal sources by the small scale rice farmers was N129,558.82 with maximum interest rate of 20%. The gross margin ratio, operating ratio, and the rate of return on investments were 0.53, 0.489 and 0.727 respectively. The study show that rice production is a profitable enterprise in the study area. The results of the Cobb Douglass Production Function analysis revealed that the statistically and significant factors influencing rice output production were labour input (P < 0.01), chemical input (P < 0.05) and fertilizer input (P < 0.05). The value of the coefficient of the multiple determinations (R2) was 0.642. This implies that 64% of the variations in the output of rice was explained by the explanatory variables included in the Cobb-Douglass production model. The results of the Probit model to determine the socio-economic factors influencing access to loan reveal that the significant variables influencing access to loan by smallscale rice farmers were education level (P < 0.10) and cooperative memberships (P < 0.05). The major constraints faced by smallscale rice farmers were; long distance to financial institutions, high interest rate, cumbersome administrative procedures, short re-payment period, lack of collateral securities and small amount of loan given. Therefore, the study recommends that Women should be considered and included in loan disbursement activities, young farmers should be included in the current youth empowerment progams to encourage them to be involved in farming business. Loans should be made available to farmers at affordable interest rate preferably single digit. Provision should be made for farmers to have access to tractors, farm machineries and other farm inputs. to encourage them to upgrade and involve in large scale rice production to be able to fill the high demand and supply gap of rice in the Nigeria. The education of farmers should be given serious priority, training should be organised for farmers through extension agents in order for them to know the guidelines involved in accessing loans and how to use farm inputs efficiently. Also, farmers should be encouraged to join cooperative organisations in order for them to have access to loan easily, Government should make a provision for special agricultural microfinance banks that should be located in rural areas to meet the need of farmers’ loan demand. Key words: Analysis, determinants, loan, smallscale farmers, rice, Nigeria

Keywords

• Analysis
• determinants
• loan
• smallscale
• farmers
• rice
• Nigeria

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