A micro-level analysis of the intensity of agricultural finance supply in Nigeria: empirical evidence
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A micro‑level analysis of the intensity of agricultural finance supply in Nigeria: empirical evidence Yusuf Ibrahim Kofarmata1 · Abubakar Hamid Danlami2 Received: 26 April 2020 / Accepted: 7 October 2020 © Springer Nature Switzerland AG 2020
Abstract Agricultural credit provides access to all other resources, which may lead to remarkable improvement in agricultural productivity. This study aims to model the determinants of credit supplied to farmers by microfinance banks. A total of 835 households and 45 microfinance banks were utilized as the samples of the study. The result of the Tobit model shows that the entrepreneurial ability of the farmers, having an account with the bank, profits from loan and the number of marketing staff of the banks have positive impacts on loan supply. Contrarily, the higher the distance of customers from the banks, the lower the intensity of loan supply. The study recommends that pro-poor credit policies are required for the establishment of new agencies and financial institutions devoted to agricultural sector. Such financial agencies should be established closer to farmers especially those in remote areas. Moreover, policies should focus on rural development through the activities that could generate off-seasonal employment. Keywords Agricultural · Finance supply · Determinants · Tobit JEL Classification Q130 · Q140
Introduction It is generally agreed that farm credit enhances farm performance and productivity, thereby ensuring a significant improvement in rural welfare and farmers’ income (Danlami et al. 2019a; Nwaru 2011). Farm credit is one of the crucial inputs considered fundamental in agricultural production. It is a way of enhancing the capital use in agricultural production by rural farmers. Perhaps, to improve farming production * Abubakar Hamid Danlami [email protected] 1
Department of Economics, Faculty of Social and Management Sciences, Yusuf Maitama Sule University Kano, Kano, Nigeria
2
Department of Economics, Faculty of Social Sciences, Bayero University Kano, Kano, Nigeria
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and increase the welfare of rural dwellers, farmers have to use improved techniques of production (Danlami 2014a, b; Kofarmata and Danlami 2019; Nuryartono et al. 2005). However, the adoption of these modern agricultural inputs and machineries are somehow expensive and most farmers cannot afford to self-finance. That is why, the adoptions of modern agricultural inputs and new machineries are very rare in Nigeria. Therefore, the desire for the peasants to switch from subsistence to mixed or commercial farming is hampered by the inability to obtain credit, imperfect market, low productivity, low income and investment. In response to these issues, Nigerian government for over 40 years has been establishing a lot of programs and policies aimed at increasing production and access to credit. Some of these programs and policies include; the establishment of Agricultural Credit Guarantee Scheme Fund (ACGSF) in 1977 and Nige
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