Constraints of Informal Agricultural Financing in the Rural Economy of Kwara State, Nigeria
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Date
2012
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School of Management and Social Sciences, Babcock University, Ilisan-Remo
Abstract
The rural farmers who constitute a large percentage of food producers in Nigeria have problem of access, to financial resources from the formal financial institutions because of the institutions' stringent conditions and location. In effect, most of the rural farmers have to rely mainly on the informal financial institutions for funding. The objective of this study was to examine the constraints facing informal agricultural financing institutions in' the rural economy ofKwara State, Nigeria. The source of data for this study was mainly primary that was collected using structured questionnaire from sampled farmers who were participating in three informal financing schemes namely: (i) periodic savings; (ii) money lending; and (iii) rotating savings in the sampled nine Local Government Areas spread through the three senatorial districts of Kwara State, Nigeria. Employing a multi-stage random sampling method, a total of 1,350 farmers were selected for the study. The returned 1,249 copies of questionnaire were then processed using descriptive statistics. The findings indicated that the farmers patronized and used the three sources of finance and the constraints facing the institutions among the farmers varied across the three senatorial districts. While high interest rate was the most . severe constraint in the south senatorial district, lack of fund as a constraint of the institutions cut across the three senatorial districts. Based on the results, the study recommended that to reduce the high dependency on money lenders with their outrageous interest rates, attempt should be made to link the informal financial institutions with the microfinance banks in the rural areas to partner with them for, group savings and' group credit 'delivery at competitive interest rates.
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Keywords
Farmer, Microfinance banks, Nigeria, Agricultural