Credit Management Techniques In Agricultural Co-operative Bank

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY:
The Nigeria Agricultural, Co-operative and Rural Development Bank Limited is a development bank established in the year 2000 following the merger of the defunct Nigeria Agricultural and Co-operative Bank Limited (NACB) and former People’s Bank of Nigeria Limited (PBN) and the Risk Assets of the Family Economics Advancement Programme (FEAP). The vision of the bank is “to be foremost people centred, self-sustaining development finance institution for rural savings, mobilization and delivery of micro and macro agricultural credit and micro credit to the poor”. The mission is “providing affordable financial and advisory services to the farmers and non-farmers enterprises of the national economy using well trained and highly motivated staff, backed by appropriate technology, thereby fostering accelerated agricultural and rural development. “Nigerian Agricultural, Co-operative and Rural Development Bank Ltd, is dedicated primarily to agricultural financing at both the micro and macro levels as well as micro financing of small and medium scale enterprises.
The bank has a 3-tier administrative structure. The Head Office is in Kaduna and there are six zonal offices located at Abuja, Kano, Bauchi, Enugu, Port Harcourt and Ibadan. Under the Zonal Offices, there is a network of over 200 branches. Enugu zonal office is responsible for monitoring and supervision of the activities of the 26 branches in the South-East zone which are distributed as follows:
ABIA ANAMBRA EBONYI ENUGU IMO
Umuahia Awka Abakaliki Enugu Owerri
Akoli Imenyi Ihiala Afikpo Nsukka Aboh Mbaise
Isuochi Nteje Akaeze Oji River Atta
Ohafia Oko Onicha Mgbowo Ideato
Ukwa Onitsha Uburu Oguta
Ukpo Orlu

The awareness of the serious decline in agricultural production necessitated the establishment of the bank. The NACRDB is not the only financial institution which provides agricultural credit. Prior to the establishment of NACRDB, agricultural credit schemes was operated by some agencies such as the Ministry of Agriculture, supervising credit scheme, agricultural credit co-operative thrift and loan scheme, farmers multi-purpose co-operative societies. Most of these institutions were not effective sources for strictly agricultural credit. There were a lot of evidence that creditors borrowed money for agriculture but diverted it to other ventures. Again, credit was often extended to only favourites and scarcely to genuine small scale farmers. Besides, they could not meet the collateral and equity contribution requirements, a situation that compelled a significant proportion of the farmers to seek for other sources of credit.
According to Idachaba quoted from Cardoso, (1987:18) or research carried out showed that 58% of farming related borrowing was from family and friends, 224% from private money tenders, 15% from merchants and only 3% from institutional sources.
However, while family and friends charged little or no interests, private money tenders charged exorbitant interests organized credit facilities for Nigerian rural farming population would reduce the dependence on sources other than the formal financial houses.
It is against this background that the researcher is to investigate how credit will effectively administered in co-operative enterprises. They will enable us to identify the major problems associated with credit administration in co-operative agricultural banks and seek solution to these problem to ensure continued existence of developing co-operatives.

1.2 STATEMENT OF PROBLEM:
In this sector, co-operative banks mobilizes credit for their members through the savings of members. It has been observed that they are inefficient in mobilizing and utilization of credits. Many problems led to this ineffective mobilization of credit. They are:
1 Illiteracy and lack of awareness.
2 High cost of credit delivery due to the fact that farmers are many and are scattered.
3 Default in loan repayment.
4 Inadequate funds to lend to the numerous customers.
5 Diversion of loans
6 Inefficient management of loan
7 Faulty loan policy which may sometimes emphasize credit worthiness of borrowers and not viability of projects.
8 Credit operations of meek money activities without proper organization procedure and planned systematic arrangement.
9 Absence of regular monitoring and supervision of loans.
The above problems need to be solved for effective performance of co-operatives.

1.3 OBJECTIVES OF THE STUDY:
The situation of co-operatives is nothing to write home about, if co-operatives should continue at this rate, they will wind up. In view of the above, solution have to be designed for these problems.
Therefore, the objective of the study is to find out the various societies existing in the area under review. To find out various problems being encountered by these co-operatives which tend to hinder their effective and efficient performance as agent of credit. Finally, to make recommendations and suggest probably solutions that will enable these societies overcome the problems so as to function effectively.

1.4 SIGNIFICANCE OF THE STUDY:
The study will assist the loan committed managers in their decision making, as it concerns credit policy and management of credit in form of proper assessment of loan applications, proper supervision of credit and evaluation of project proposals. It will help the management to see the need to employ professional staff and lastly, the study or findings will be of educational importance to the various universities, polytechnics and students of co-operative departments in the various schools.

1.5 SCOPE AND LIMITATION:
The researcher limits this study to effective credit management in Agricultural Co-operative Bank, Enugu South Local Government Area. The researcher intended to find out the available sources of fund to co-operatives as well as the financial problems of co-operatives. The researcher found out the process of credit administration and some factors militating against credit management.

1.5.1 LIMITATIONS
In the course of accomplishing this study, the researcher was faced with the following problems:
10 FINANCE: There was no fund to facilitate on the issue of traveling around for further research to the agricultural co-operative banks. Besides, there was high cost of transportation. This resulted to a barrier in research movement.
11 TIME: The researcher found it difficult to combine the research work with academic work such as assignments, exams, etc due to their constraints.
12 DIFFICULTIES IN COLLECTION OF DATA: The researcher had limited access to official records and statistical data relevant to this work.

1.6 DEFINITION OF TERMS:
For clarity of purpose, limitation of confusion and any kind and the proper understanding of this study, the following definition of terms is necessary:
CREDIT: David W. Pearly defined credit as financing directly or indirectly, the expenditure of other against future repayment. Such lending or financing is direct when say, a bank extend an overdraft facility to a customer who then uses it. It is indirect when a trader or producer supplies goods on credit. Traditional savings and credit groups are one of the most common variants of informal financial intermediaries in rural areas (Ijere 1991:23).
MANAGEMENT: administration or management is the art of attempting to achieve stated objectives by directing human activities in the production of goods and services. Management utilizes the land, factory, officers, machinery and other facilities at the disposal of the enterprises in the most effective, efficient and profitable manner. Bob Igwe (1993:39).
TECHNIQUE: Method of performing something.
ENTERPRISE: Enteprise is an economic system in which individuals are free, singly, collectively. To own capital and undertake economic activity within a frame work of social legislation designed to protect the interest of the members (Hamson 1974:218).

1.7 RESEARCH QUESTION:
For the fact that credit is very important in every business activities, therefore, the study is focused on finding relevant solutions to the following research questions:
1. How do you manage your agricultural credit techniques?
2. What is the purpose of credit management in agricultural co-operative bank in Enugu South?
3. What problems are encountered in the administration of credit in agricultural co-operative bank and what are the solutions to these problems?