Role Of Financial Institutions In Agricultural Development
(A Case Study of Nigerian Agricultural, Co-operative and Rural Development Bank ltd South East Zonal Headquarters Enugu)
Financial institutions play a crucial role in fostering agricultural development through various means. They provide essential financial services such as loans, credit facilities, and investment opportunities tailored to the specific needs of farmers, agricultural businesses, and rural communities. These institutions facilitate access to capital for purchasing inputs like seeds, fertilizers, and machinery, as well as for investing in infrastructure and technology upgrades. Additionally, they offer risk management tools such as insurance and hedging products to mitigate the uncertainties inherent in agricultural production. Furthermore, financial institutions contribute to knowledge dissemination and capacity building by providing training and advisory services to farmers, enabling them to adopt best practices and improve productivity. Overall, the collaborative efforts of financial institutions and agricultural stakeholders are instrumental in driving sustainable growth, innovation, and resilience in the agricultural sector, thereby fostering economic development and food security.
The role financial institutions have played in the growth and development of Nigeria economy can not be overemphasized. There had been a growing realization of the importance of financial institutions in the growth and development of Nigerian economy due to the credit facility and various other services it rendered. The objectives of the study is to access the impact of Nigeria Agricultural Co-operative and Rural Development Bank (NACROB) in Enugu Zonal Headquarter on socio-economic status or rural farmers, and evaluate the National – livestock small holders loans scheme under the NACRDB among farmer in Enugu North. The instruments for data collection is through personal interview and administration of questionnaire as her primary source of data collection by the researcher and the sampling size of the study were 40 professional fishermen as beneficiaries and 25 people as non-beneficiaries. The method employed is through personal visit to NACRDB at Nsukka representative office. The data obtain in the questionnaires administered were scored and the percentages were calculated and presented in frequency tables. From the information gathered, it was observed that fishermen beneficiaries benefited from the loans and other services rendered by NACRDB as they purchased more of fishing input while the Non-beneficiaries enjoyed little or no benefits at all. It was concluded that right policies should be put in place and the constraints identified in the study be address.
Title page
Approval page
Certification
Dedication
Acknowledgment
Table of content
Abstract
Chapter 1:
INTRODUCTION
Background of the Study
Statement of the problem
Purpose of the study
Significance of the study
Research questions
Scope/Delimitation of the study
Definition of terms –
Chapter II:
REVIEW OF RELATED LITERATURE
Financial Institutions in Agricultural Programmes
Agricultural Financial Services
He Nigerian Agricultural, Cooperative and Rural
Development Bank
Agricultural Credit Guarantee Scheme Fund
Agricultural Credit Support Scheme
Summary of Review
CHAPTER III:
RESEARCH METHODS
Research design
Area of study
Population of the study
Sample size and sampling technique
Instrument for data collection
Method of data collection
Validation and reliability of the instrument
Method of data analysis
CHAPTER IV
Data Presentation and Analysis
CHAPTER V:
SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
Summary of findings
Conclusion
Recommendations
Limitation of the finding
References
Appendix
INTRODUCTION
Background of the Study
The Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB) is a development finance institution, which was specifically set up to deliver credit to the agricultural sector of the economy. This is carried out through the provision of loans to individual farmers, co-operative organization, limited liability companies, state and federal government agencies. In addition, the bank provides financing by direct investment in the equity capital of major agricultural and agro-allied ventures, to enables them raise fund/capital either locally or from abroad. The activities of the bank are geared toward assisting in improving the income and welfare of farmers, promoting rural development as well as increasing the nations output of food and cash crop to meet the needs of a rapidly increasing population (NACRDB 1989). In 1981, the NACRDB small holder famer loan scheme (SHLS) was initiated on a pilot basis. By 1984, it was clear that the pilot scheme was a success in term of both fund utilization by farmers for farming and loan recovery. As a result of the economic hardship in which the country found itself in 1984, and which led to large scale retrenchments in both the public and private sectors of the economy, the bank widened the scope of it direct small holder scheme to take care of retrenched workers who wanted to take up farming an occupation further to this, the widening of the scope also took care of those still in employment in both the public and private sectors but who were interested in farming (Ajakniye, 1989). During this period, the National Livestock Production Loan Scheme (NLPLS) was also established for the purpose of promoting and encouraging livestock production in the country. The (NLPLS) was open to all farmer offered a variety of livestock production models/option suitable for 39 different and varying ecological zones of Nigeria, such livestock enterprise model include pastoral farming, sheep fattening, cattle fattening, poultry layer in unit of 200 cattle-breeding unit, grazing reserve, pig fattening, poultry boiler in unit of 200, and goat breeding unit.
However, to qualify for a loan, NACB had laid down criteria which an applicant must satisfy before a loan was granted by the selection committee.
The criteria were that the farmer must:
i. Be a full time farmer (that is, his sole means of income is from his farm).
ii. Be credit worthy (that is, not being involved in any other credit scheme or not having record of bad debt (owes money) and not avoiding repayment);
iii. Have some livestock experience, but not essential.
iv. Provide facilities (that is, a suitable yard for fatterning as well as labour).
v. Have grazing land and be able to provide crop residues;
vi. Have access to water (that is, a well or stand pipe in the case of a village water scheme);
vii. Be able to provide 3 loan guarantors;
viii. Be able to provide simple water and feed facilities;
ix. Be able to provide a cash contribution of not less than 10% of the loan as required in cash or kind for the propose production model/option.
In view of the above criteria, a preliminary suitability assessment of an applicant would be carried out by extension workers before a detailed inspection of the farm could be made by NACB/NLPS officers, such an assessment was expected to help in avoiding time wastage and unnecessary expenses on obvious non-qualified farmers on the basis of some of the above stated criteria/conditions.
One other important condition, which the farmer must fulfill, was the signing of a loan agreement form, which was legally binding. The content of the agreement form included:-
a. Purchasing of approved stock from approved sources;
b. Possession and/or readiness to acquire good livestock management standards;
c. Purchasing of standard feeds from approved source;
d. The sale of stock and repayment of loan within the stipulated period etc. Any farmer that refused to comply with the loan agreement condition was not eligible to loan renewal. Legal action were taken against loan repayment defaulters at Magistrate Court (Ajakaiye, 1989). Between 1979, all the operational activities of the NACB such as loan approval and disbursement were done at Kaduna, headquarters. By 1980, the operations of the bank become decentralized such that the regional offices could process, approve and disburse loans to their clientele.
The decentralization was informed by the recognition of the fact, it would be too costly and virtually impossible for the millions of the agency’s customers, especially, rural farmers, to travel long distances before obtaining agricultural loans (Ajakaya 1989). As a result of the decentralization the National Livestock Small Holder Loan Scheme (NLSHLS) came into existence in Nsukka agricultural zone in 1987 with a take-off of 12 beneficiaries, drawn from a few rural communities within the zone. By 2003 the NLSHLS had spread to many rural communities (Nru, Ameze, Nguru, Ovoko, Ibagwa Aka, Ikakpu Awka, Ogurute, Unadu, Alor-Uno, Obollo Afor, Adani, Achi, Umuogbu Agu, Aji, Orba, Umuopu etc) with a tremendous increase in the number of the beneficiaries from 12 to 246. Loans ranging from N3000 to N30,000 at 15% interest vote were given to different farmer on the basis of the type of animal possessed. The scheme was being covered by the Nigeria Agricultural Insurance Company (NAIC). The scheme is currently operating under an Umbrella called the Nigerian Agricultural co-operative and Rural Development Bank (NACRDB) following the merger of the NACB, people Bank of Nigeria (PBN) and Family Economic Advancement Programme (FEAP) by the federal government in 2009 with a take-off grant of N11 billion (federal government of Nigeria 2000) After 10 years of existence of the scheme and involvement of the beneficiaries, certain relevant attitudinal and impact evaluation questions became pertinent.
Statement of Problem
The number one problem among these thousands of farmers is that, they are ignorant of this wonderful financial lending institution as bodies that saddled with responsibility to providing them with loans. Again those who have some knowledge are not convinced to log on to this beautiful scheme out of fear of it working out. The financial lending institutions fail in their obligation in the disbursement of funds to these peasant farmers because of the perceived high default rates among farmers. Consequently, the aim of these institutions that give funds seem to be defeated as rural farmers are still at the very poor state of that they were. This thesis is born out of this ugly situation.
Purpose of the Study
To assess the impact of Nigeria Agricultural co-operative and Rural Development bank (NACRDB). Enugu Zonal Headquarter on socio-economic status of the rural farmers; and to evaluate the National-Livestock small holder loans scheme under the NACRDB among farmer in Enugu North. Again, to evaluate the NLSHLS among rural farmers in Nsukka agricultural zone of Enugu State, as well as re-address the constrain of farmers access to credit in the financial institutions.
Significance of the Study
The thesis has to a large extent provided the way forward for all the rural farmer dwellers. As it analysis how any farmer both large and small scale can be a beneficiary in the scheme, the requirements for obtaining loans as well as the small interest rate. The farmers were made to know that the loan givers help them in the feasibility studies to ensure good result. Professionals in Agriculture are consulted for the farmers free of charge.
Research Questions
i. What is the attitude of the rural dwellers towards the scheme? It seems they are ignorant of the scheme.
ii. What is the status of loan repayment by the beneficiaries? Some of the bank expect repayment with interest after one to two years.
iii. Has the scheme made any meaningful impact on the socio-economic life of the beneficiaries? The answer was yes. Those who has the courage to go for the loan made it to a reasonable extent.
1.6 Scope/Delimitation of the Study
This study cannot clam to be all embracing due to time and money constraint. However, this work actually gives an insight on the challenges rural farmers in Enugu face, as well as solutions were prepared.
Definitions of Terms
Attempt is made to define operative terms used in this work:
i. Financial Institution: An institution that provide financial service for its clients or members.
ii. Co-operative and Rural Development Bank: This organization is having the obligation of lending money to rural farmers.
iii. Beneficiary: In the broadest sense it is a natural person or other legal entity who receive money or other benefit from a benefactor.
iv. Loan: An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money.
v. Livestock: This refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and abor.
Role Of Financial Institutions In Agricultural Development:
Financial institutions play a crucial role in agricultural development by providing essential financial services, capital, and resources to farmers and agribusinesses. Agriculture is a vital sector of most economies, and its development is closely linked to overall economic growth, poverty reduction, and food security. Financial institutions, including banks, microfinance institutions, agricultural cooperatives, and development finance organizations, contribute to agricultural development in several ways:
- Access to Capital: Many small-scale farmers lack the necessary capital to invest in modern farming techniques, equipment, seeds, and other inputs. Financial institutions provide loans and credit to farmers, enabling them to purchase the necessary resources to enhance productivity and improve crop yields.
- Risk Management: Agriculture is subject to various risks, including weather-related risks, price volatility, and pests. Financial institutions offer risk management tools such as insurance and commodity hedging products, which help farmers protect their investments and stabilize their income.
- Technology Adoption: Access to finance enables farmers to adopt modern agricultural technologies and practices, such as precision farming, mechanization, irrigation systems, and biotechnology. These technologies lead to increased efficiency, reduced labor requirements, and higher yields.
- Value Chain Financing: Financial institutions support not only farmers but also the entire agricultural value chain. They provide financing to agribusinesses involved in processing, storage, transportation, and marketing of agricultural products. This ensures the smooth flow of goods from farm to market.
- Capacity Building: Financial institutions often offer training and capacity-building programs to farmers. These programs educate farmers about financial literacy, business management, and sustainable agricultural practices, empowering them to make informed decisions and manage their farms more effectively.
- Innovation and Research: Agricultural research and development require funding to create new and improved crop varieties, better farming techniques, and environmentally friendly practices. Financial institutions can invest in agricultural innovation by providing funding for research projects and startups in the agri-tech sector.
- Seasonal Funding: Agriculture is often a seasonal endeavor, with farmers requiring additional funds during planting and harvesting seasons. Financial institutions provide short-term loans and credit lines to meet these seasonal financial needs.
- Microfinance and Inclusion: Many smallholder farmers, especially in developing countries, have limited access to formal financial services due to their remote locations and lack of collateral. Microfinance institutions offer tailored financial solutions to these underserved populations, promoting financial inclusion and poverty reduction.
- Long-Term Investment: Financial institutions can facilitate long-term investments in agriculture, such as infrastructure development (irrigation systems, rural roads, etc.) and sustainable land management practices. These investments contribute to the overall development of rural areas.
- Food Security and Poverty Alleviation: By supporting agricultural development, financial institutions contribute to increased food production, which is essential for food security. Moreover, thriving agriculture creates employment opportunities, raises rural incomes, and reduces poverty in farming communities.
In summary, financial institutions play a pivotal role in driving agricultural development by providing farmers and agribusinesses with the necessary financial resources, risk management tools, and capacity-building support to enhance productivity, sustainability, and economic growth in the agricultural sector.