Analysis of Informal Credit Constraints among Farmers in South East, Nigeria
Abstract
Empirical evidence on determinants of credit constraint types among informal credit users is almost nonexistence in south east, Nigeria. Using a well-structured questionnaire and an extended direct approach, primary data were collected and analysed using seemingly unrelated regression model. The seemingly unrelated regression analysis of factors influencing credit constraint by types showed age (p<0.05) and dependency ratio (p<0.05) positively affect risk constrained households, while non-farm income (p<0.05) and farm size (p<0.05) negatively affect risk constrained farm households. Also, the result showed that quantity constraint positively depends on amount requested (p<0.05) and negatively on household size (p<0.01), education (p<0.05) and interest (p<0.05). Farming experience (p<0.05) and interest rate (p<0.05) were negative, while distance (p<0.01) was positive for transaction cost constrained type. Price constraint positively depends on dependency ratio (p<0.05), non-farm income (p<0.05) and interest rate (p<0.01) and negatively depends on gender (p<0.05) and farm size (p<0.05). Therefore, it is recommended that in order to cushion the effect of informal credit constraint, lenders should train potential borrowers and establish organised informal monitoring team for each state to serve as an insurance against any default. Also, Institution capacity building for both lenders and borrowers should be an integral part of every credit programme that will be provided in order to increase agricultural productivity and the income of farmers, thus policy measures for improving access to credit should be developed based on farmer’s needs.
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