DETERMINANTS OF AGRICULTURAL CREDIT DEMAND AMONG SMALLHOLDER FARMERS IN RURAL ABEOKUTA, NIGERIA

Authors: Yusuf K. Ibrahim & Kamilu A. Saka

ABSTRACT

This study investigates the socioeconomic determinants of smallholder farmers’ formal credit decisions in rural Abeokuta, Ogun State, Nigeria. A binary logit model approach was employed to analyse cross-sectional survey data drawn from 768 smallholder farmers in the study area. The study’s analyses were performed at three significance levels (1%, 5% and 10%) using STATA 12.1 as the statistical software. Likelihood Ratio test and the Pearson chi-square test at a 1 per cent significance level suggest that the study’s empirical model best fits the observed data. The study findings show that getting old, additional education, longer distance and perceived expected inflation significantly reduce the likelihood that smallholder farmers in the study area apply for loans or credit from formal financial institutions. Based on this outcome, the study affirms that socioeconomic factors like age, education, distance and perceived expected inflation significantly discourage smallholder farmers in rural Abeokuta from accessing formal financial products and services.  The study suggests that formal financial institutions in the Abeokuta metropolis and the government should redirect their lending models’ focus to mainly young rural farmers in the study area. At the national level, monetary and fiscal policies that effectively and timely address rising inflation levels should be implemented.

Keywords: Agriculture, Loan Demand, Rural, Abeokuta, Logit Model

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