Analyses of Market Demand for Non-Institutional Agricultural Credit among Rural Farmers in Anambra State, Nigeria

Abstract

Farmers participate in the credit market to get access to financial resources, and the extent of access will determine their farming decisions. This study focused on determinants of informal agricultural credit demand among rural farmers in Anambra State, Nigeria. Data were collected with a structured questionnaire. In the absence of sample selection bias, the probit model was used to analyse the data collected. The study finds that rural farm households obtain credit for their agricultural activities from various informal sources within their reach. Findings of the probit regression analysis indicates that variables that significantly influenced decision to participate in informal credit market with their coefficients were: gender (p<0.01); age (p<0.01); education (p<0.01); income (p<0.01); distance (p<0.01); household size (p<0.01); farm size (p<0.05); major occupation (p<0.05); interest rate (p<0.05); and social capital (p<0.05). To ease the credit constraints often faced by rural farm households, stakeholders should make an effort to increase the presence of informal financial institutions in rural areas. The study also recommends that participation of farmers in the informal credit market should be encouraged through farmer’s association, this will help in involvement of borrowers in both operational and policy decisions which constitutes strong participatory elements in management of credit and also, help to unleash the inherent social capital and information advantages for improved informal financing.