Abstract:
This study examined the determinants of small-scale agro-processors’ participation in credit markets in Ondo State Nigeria. Specific objectives were to examine factors that influenced agro-processors’ participation in credit market and to determine the demand for business credit by agro-processors. Purposive sampling method was used to select 186 agro-processors across Ondo State. The study used primary data with the administration of well – structured questionnaire on one hundred and eighty-six (186) respondents from three Local Government Areas in Ondo State, Nigeria. The data collected were analysed using the descriptive statistics, Heckman Probit model, and Heckman Two – Step Selection Model. Formal credit sources available to respondents include Cooperative societies, Microfinance Banks, Commercial Banks and Bank of industry. While the informal credit sources available includes Personal savings, Friends and Relatives, Thrifts, Value Chain financing, and money lenders. The results showed that Cooperative societies is the most patronized formal source while bank of industry is the least patronized. For the informal sources, Personal savings ranked first as the most patronized source of fund for agro-processors while Money lenders was not patronized. The results also showed that cooperative societies lent the amount of credit demanded by agro-processors while commercial banks lent lower or exact amount requested agro-processors. Furthermore, the results of Heckman Probit model showed that, Age, Operating bank account, debt status, membership of association and savings were positively significant at 10%, Asset base, is positively significant at 5% and Level of education is positively significant at 1% while, Sex, years of experience and type of enterprise had no significance on the determination of Agro-processors’ participation in the credit market. Also, the result of Heckman two –step selection model revealed that collateral is positively significant at 1%, aside interest rate that is negatively significant, credit source, level of education, debt status and savings are positively significant at 5%, asset and membership of association are positively significant at 10% while years of experience, type of enterprise, and use of internet banking are not significant factors determining the amount of credit demand. Small-scale Agro-processors need to organize themselves into agricultural produce processing associations to enhance their credit worthiness and information advantages for improved agro-processing financing. Financial institutions (e.g. NAIC, ADB, BOA etc) need to evolve agro-processors with their different credit schemes with single digit interest rates.
