Access to Formal Credit by Farmers’ Co-operatives in Enugu State, Nigeria
This study examined access to formal credit by farmers’ co-operatives in Enugu State. The specific objectives were to: (i) ascertain the institutional credit guidelines which affected access to formal credit by farmers’ co-operatives in Enugu State, (ii) describe the patterns of access to credit, (iii) ascertain the extent of access to formal credit by the respondents, (iv) ascertain the factors which determined access to formal credit, (v) examine the respondents’ perceptions of the effects of institutional credit guidelines on access to credit and (vi) identify the constraints experienced by banks and farmers’ co-operatives in the course of providing and accessing credit respectively. The study adopted survey design. Multi-stage, purposive and random sampling techniques were used for data collection. Nine local government areas (LGAs) were purposively selected from the seventeen LGAs that make up Enugu State. One hundred and eleven active formers’ co-operatives were randomly selected out of a population of two hundred and twenty-two active farmers’ co-operatives found in the selected LGAs. Twenty each of commercial and micro-finance banks that provided credit to farmers’ co-operative societies in the study area were also randomly selected. Therefore, the overall sample size for the study was 151 respondents. Data were collected using structured questionnaire. Data were analysed using Ordinary Least Square (OLS) Regression Models, Access Index (AI) and Likert Scale Rating. Institutional credit guidelines which negatively affected access to formal credit were: interest rate (83.49%), collateral requirement (39.89%), minimum account balance (69.81%), and number of documents required from co-operatives by banks (71.27%). Patterns of credit flow from banks to farmers’ co-operatives were cash (73%), production goods (20%) and technical training (7%). Out of the whole farmers’ co-operatives that applied for credit, only twenty-seven (24.3%) were able to access credit. Extent of access to credit was very minimal (17.3%). Socio-economic characteristics of farmers’ co-operatives that determined access to formal credit were: age of co-operatives (p<0.01), educational level of co-operative members (p<0.05), co-operatives’ equity capital value (p<0.05), co-operatives’ asset value (p<0.01), and cost of processing credit application (p<0.05). Banks’ institutional credit guidelines which determined access were: interest rate (p<0.01), value of collateral (p<0.10), minimum account balance (p<0.01), and number of documents required by banks (p<0.01). Farmers’ societies without access were more constrained by the guidelines than those that had access. Factors that constrained co-operatives with access were: interest rate (1.98), minimum account balance (1.99), while those that constrained co-operatives without access were: interest rate (2.83), collateral requirement (2.53), minimum account balance (2.87), and number of documents required (1.97). The problems experienced in the course of sourcing credit were: lack of information (69%), stringent banks’ credit policies (77%), long period of processing credit applications by banks (67%), banks’ discrimination against agricultural lending (60%), cumbersome documentations (70%), and approval of insufficient amount by banks (64%). Problems encountered by banks in the course of providing credit to farmers’ co-operatives were: credit repayment default (90%), difficulties in enforcing credit contracts (45%), inability on the part of co-operatives to provide collateral (55%) and lack of borrowers’ credit history (42%).