DETERMINANTS OF ARABLE CROP FARMERS’ PARTICIPATION IN CREDIT MARKET IN ONDO STATE, NIGERIA

Abstract

This study examined the determinants of arable crop farmers’ participation in credit markets in Ondo State Nigeria. In specific term, factors influencing arable crop farmers’ participation in credit market and those that determine their credit demand were analysed. Multistage sampling method was used to select 150 arable crop farmers in three (3) Local Government Area (Akure South, Akure North and Ifedore) in Ondo State. Primary data were collected through the administration of well-structured questionnaire on the one hundred and fifty (150) respondents from the aforementioned three (3) Local Government Areas in Ondo State, Nigeria. The data were analysed using the descriptive statistics, Heckman Probit model, Heckman Two – Step Selection Model and Kendal’s Coefficient of Concordance. Result showed that majority of the respondents (72%) patronized formal source of credit such as cooperative societies, microfinance banks, commercial banks and Bank of Agriculture while 28% of respondents still seek loan from informal credit sources such as money lender and friends even though the amount of loan granted for arable crop farmers through these sources were small compare to the amount requested. Result revealed that majority of the respondents (64%) made use of cooperative society due to its processing and relaxed condition for active members. The respondents’ credit rating and score result showed that 81% of the farmers have low credit score and rating while only 19 % had a good credit score and rating. The results of Heckman Probit model showed that year of farm experience and level of formal education were positively significant and capital volume was negatively significant at 1%. Asset base, household size and farm size were positively significant at 5%. Income and debt status were negatively significant and savings was positively significant at 10% in determining the probability of participating in credit market. The results of Heckman two –step selection model showed that farm size and asset base were positively significant at 1% and interest rate was negatively significant at 1%. Also, debt status and capital volume were negatively significant at 5% while savings and credit source were positively significant at 5%. Income of the arable crop farmers was negatively significant at 10% in determining their credit demand. The major constraints to participate in credit markets by the respondents were distance to financial institution, lack record keeping, high interest rate and lack of collateral. This study recommended that access to credit facility with low interest rate should be granted to arable crop farmers at the appropriate time to enable them to adopt modern technologies that will improve farm production and productivity