DETERMINANTS OF AGRICULTURAL MICRO-CREDIT REPAYMENTEVIDENCE FROM MINNA MICROFINANCE BANK, NIGERIA

Abstract

The study assessed the determinants of agricultural micro-credit repayments by beneficiaries of Minna Micro-finance Bank, Nigeria. Multi-stage sampling technique was employed to select 180 respondents for the study while descriptive statistics and multinomial binary logit model were employed for data analyses. The study affirmed that substantial proportion of respondents (42.78%) were smallholders owning between 1.1-2.0 hectares of land. Ironically, 61.67% do not belong to cooperatives or farmers’ associations. The volume of loans disbursed to beneficiaries was a significant determinant of agricultural micro-credit repayment. The analysis further established that repayment increased with the volume of micro-credit received, as 100% and 82% of those who received above N250,000 and N200,000 - N250,000, respectively repaid compared to 74.34% of those who received between N50,000 and N100,000. Also, majority (68.89%) of the respondents indicated that the short period of loan tenor, high interest rate (55%) and loan period (54%) were major obstacles in loan acquisition. Against this backdrop, the study recommended the need for proper financial analysis of beneficiaries’ enterprises with the view to effectively ascertaining the quantum of credit needs while premising financial inflow of the bank on long term funds (without prejudice to the existing revolving loan mechanism) such as the pension contributions, with the view to enhancing the resource base of the bank and its ability to effectively support beneficiaries while guaranteeing its own sustainability. Channeling micro-credits through farmer institutions, allowing for longer loan repayment periods and premising interest on economic and social considerations will also enhance effective loan recovery.