THE ROLE OF COMMERCIAL BANKS IN FINANCE SMALL SCALE AGRICULTURAL.

(A CASE STUDY OF UDI, AWGU, EZIAGU AND ENUGU SOUTH).

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ABSTRACT

 

The study was done to ascertain the role of commercial banks in financing small-scale agriculture in selected areas of enugu agricultural zone. The aim was to determine the extent to which commercial banks have given out loans for small scale agriculture in comparison with other source of credit, and to look into the problem faced by both the small holder farmers and the banks as regard credit flow to farmers.

The problems of loans repayment and reasons for loan default were also taken into consideration in this study.  Information was gathered through questionnaire and personal interviews.

It was gathered b from the result that the small scale formers have not benefit to any noticeable extent from commercial banks credit accommodation in the bid to improved their farms. The study also indicated that rigorous procedures and complexity of loans farms were some of the factors that vitiate and reduce the access of small farmers to credit.

In addition, it was gather that the inducement to ask for credit facilities by the small scale farmers from commercial bank died down due to the level of collate red requirement, viability of the scheme form which the loan was to be granted, the tag that the beneficiary  in most cases must be a corporation or a limited liability  company, other problem the small scale farmers envisaged as regard being accommodated by commercial banks or other financial institutions includes in a nutshell, illiteracy, ignorance, small size of farm holdings, little capital, lack of tangible assets and clear little of land low level of productivity, low income, little or no saving, interest rate paid, and economic condition in general.

The importance of these finding were also indicated. In particular so long as the current practice of subjecting the farmer to some vigous procedure and task to overcome before granting the credit, it will be unrealistic to expect credit programmers to benefit small scale farmers and suggest the need for policies designed to accommodated these limitation.

Finally, it was suggested that channeling credit through farmer’s co-operatives would conderably strengthen the risk of loan default.

 

 

 

TABLE OF CONTENTS

CHAPTER    ONE

• INTRODUCTION

1.1      Statement of problems

• Purpose of the study
• Significance of the study
• Statement of hypothesis
• Scope and limitation of the study
• Definition of terms

 

 CHAPTER TWO

2.0     REVIEW OF RELATED LITERATURE

• Significance of small farmers
• Source of finance
• Uses of finance
• Role of commercial banks
• Factors affecting the distribution of credit to farmers
• Repayment performance in credit programme
• Problems associated with agriculture itself.

 

  CHAPTER THREE

• RESEARCH DESIGN AND METHODOLOGY

3.1     sampling procedure

• Data collection
• Questionnaires design
• Statistical treatment.

 

 

CHAPTER FIVE

5.0    SUMMARY FINDING CONCLUSION AND RECOMMENDATION

• Finding
• Conclusion
• Recommendation

BIBLIOGRAPHY

APPENDIX (QUESTIONNAIRES)

 

                                                    CHAPTER ONE

 

• INTRODUCTION

In Nigeria, agricultural like in most other developing countries the small scale farmer predominates several constraint and barriers which appear insurmountable limited the overall farming activities and if this is anything to go by, it can destroy a developing economy which heavily rest on the shoulders of small scale farmer. These small scale farmer are characterized by illiteracy, ignorance, small size of farm holding, little capital, lack of tangible asset and tenure system, low level of technology, low level of productivity, low level income, and general rural milieu. These features combined together makes the services of formal source of finance difficult to the small farmer. The resultant effect is that it becomes inevitable exposed to other informal source of finance and stands to be exploited at the slightest opportunities,

The important of credit to small scale farmer cannot be over emphasized in view of the fact that 90% of Nigerian farmers who actually feed the nation are in the category of small scale farmers.  These farmers employ very little capital for their production.  Unfortunately factors mentioned earlier makes it difficult for small scale farmers to have access to the service of financial institution. The banks fear that due to the problem affecting the small scale farmer, that they cannot be repay back bank loans.

Credit is a vital element in agricultural foundation without which the farmer can hardly do mush. It contributes to farmers social welfare enhances productivity, help in capital formation and continuity of income.

It is lack of adequate credit facilities that makes it impossible for farmers in our rural areas to adjust to new and improved techniques that will lead to increase output and productivity. This implies that the increase credit facilities will lead to rapid agricultural development by accelerating the rate of adoption of new and improved method and technique of farming by our rural farmers. It is in full realization of the death of agricultural product that the federal government of Nigeria has geared  its efforts towards increased food  production by establishing such programmers and scheme as natural accelerated food production scheme.

Agricultural and co-operative bank NACB, Rural Bank Scheme, River Basin and other Agricultural scheme provided  by the third and fourth development plans respectively.

It is observe from the above that both the federal government and state government have now come to show some degree of concern for the rural farmers i.e. small scale farmers and their need for credit loan.

The Nigerian Agricultural and co-operative bank (NACB) was established by the federal republic of Nigeria in 1973 as Nigerian Agricultural development bank (NADB), which has change to the Nigerian Agricultural and co-operative bank in 1978 in order to enhance co-operative activities. The establishment of NACB was government realization of the importance of credit to agricultural production.

As a development banks, it was charged with the rate of contributing to the overall development of agricultural production and agro based industries. It authorized and paid up capital of N1million was increased to N2million in 1975 and the federal government wholly subscribed this.

The primary objective of the bank is to increase the level and quantity of agricultural production including poultry: – farming pig breading, fisheries, forestry, timber production, animal husbandry and other type of farming as well as storage and marketing of such production in Nigeria. The specific objectives are to assist in promoting rural development as well as improving income and quality of life of Nigeria rural population  and make the nation self sufficient in food production. This bank grants loan for agricultural production. To encourage the commercial bank to grant loan to farmers, the federal government stipulated that at least 6% of commercial bank loans and advance raised to 15% in 1999, between 2000 and 2002 raised to 18% must be given to agricultural sector.

The liberalization of the economy during the sap era gave boost supports, which agricultural also benefited earning enormously. Although, agricultural financing was on the decline, the birth of community banks in early 1991 brighter more hope for agricultural; financing in the rural areas, and communities where, these unit banks were established although the impact is yet to be felt.

In order to facilities this guideline, the agricultural credit guarantee scheme fund (, A.C.G.S.F) fund act , No 26 of 1977 came in to see that small scale farmers source loan to finance their agriculture from the commercials banks.

In doing so, the small-scale farmers should first obtain certificate of guarantee from the central Bank that will guarantee them to get loan from Commercial Bank.

The active participation of commercial banks in the finance of agricultural in Nigeria. For amongst these constraint were the high rate of risk involve in extending loan to agricultural sector. The second’s important constraint was the subsistence nature of productive activities, which could hamper loan repayment.

As at 2000, agricultural loans valued at N88million guarantee under the agricultural credit Guarantee scheme (A.C.G.S) decline by 3.6% in number and increased by 7.2% in value in 2001 due to interest elements.

As at 2002, only very few commercials bank aid agriculture and the few that grant credit the procedure is too directed and processed at the Banks head offices. Infect individual loans have bees quietly ignored except for  group in the form of co-operative society which also has to be backed with good security or collateral.

Between January 2002 to September 2002, only a poultry N0.500million was spent to boost agric