TRANSFORMATION OF AGRICULTURAL FINANCING PROGRAM: LESSONS FROM THE PERFORMANCE OF MICROFINANCE INSTITUTIONS (MFIS) IN NIGER STATE, NIGERIA

Abstract

ABSTRACT The study was carried out to examine the profitability of Microfinance institutions in the agricultural transformation in the realization that access to agricultural finance is the key to this objective. Recent financial sector reforms have placed microfinance options as a viable vehicle or veritable tool for improved credit access by the active and productive poor entrepreneurs and the vulnerable group to poverty. A recent study aimed at determining the performance of microfinance institutions (MFTs) in Niger State, Nigeria point to the need to learn and acknowledge some lessons and intricacies for use by the credit managers, policy makers and by the managers of the transformation program especially for the value chain development activities. The survey was conducted to determine sources of funds, their uses and main activities financed, cost of operation, their profitability and ultimately, their sustainability. A multiphase sampling technique was employed in the selection of the samples for detailed analysis. Two sets of questionnaires were administered on eleven (11) MFTs in the state to collect primary data, financial resources and mode of operations; sources and uses of funds, resources use efficiency as well as outreach. Data were analyzed using descriptive statistics. Levels of savings of members/clients, microloans packages and delivered (outreach), women participations in MFTs programs, levels of profits generated as well as returns to investments and to assets were measured. The results showed that three categories or segment of MFIs operate in the area namely; formal finance institutions (FFIs) semi-formal finance institutions (SMFIs), and informal finance institutions (IMFTs) each with its unique features and model of operations. The result also revealed that average returns on assets for IMFI and SMFI were 4-6% over the period and confirms efficient use of resources which also translates to their sustainability. The study further showed that there is high dependence on costly borrowed funds as against savings by members, and which may delay achievement of sustainability going by their level of dependence on subsidy. As to the main activities engaged by MFIs in the area, petty trading ranks first followed by small scale farming, equipment financing like leasing, livestock domestication, food and restaurant severances, artisans and household wares trading respectively. With regards to problems and constraints to their growth and sustainability, lack of qualified personal was first, inadequate funding and working capital; delay in board decision, problem of repayment by the clients, inconsistency in government policy etc. were indicated. Some of the recommendations include provision of incentives by the government to ease implementation problems such as the policy framework of MFIs, training for staff of MFTs, networking among the practitioners, effective monitoring and supervision by the appropriate authority etc.