PROBLEMS AND PROSPECTS OF LENDING TO SMALL SCALE AGRICULTURAL PRODUCERS IN BANK OF AGRICULTURE OF NIGERIA
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PROBLEMS
AND PROSPECTS OF LENDING TO SMALL SCALE AGRICULTURAL PRODUCERS IN BANK OF
AGRICULTURE OF NIGERIA
ABSTRACT
The research work on “The Problems and Prospects of Lending
to Small Scale Agricultural Producers in Bank of Agriculture. For the research
work to be adequately understood, the researcher introduced the subject matter
highlighting the statement of general problem. This project also touched on the
research objectives, scope of study and significance of the study, the research
went further to review related literatures on the subject matter. Due to time
constraints, the researcher has only highlighted the major aspects of the
agricultural credit schemes and repayment of loans. In a way it could still
provide for an input to deeper analysis of the subject matter in this part of
the Bank (B.O.A) and other in the commercial process of banks in general in
carrying out this work. However, this dissertation has been grouped into five
chapters.
TABLE OF CONTENTS
TITLE
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DECLARATION
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APPROVAL
PAGE
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DEDICATION
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ACKNOWLEDGEMENT
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ABSTRACT
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TABLE OF CONTENTS -
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CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
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1.2
STATEMENT OF THE PROBLEM
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1.3
OBJECTIVES OF THE STUDY
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1.4
RESEARCH QUESTIONS
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1.5
SIGNIFICANCE OF THE STUDY
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1.6
SCOPE OF THE STUDY
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1.7
LIMITATION OF THE STUDY
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CHAPTER TWO
2.0
LITERATURE REVIEW
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2.1
ROLE OF CREDIT IN AGRICULTURAL
DEVELOPMENT
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2.2
CHANNELS AVAILABLE FOR FINANCING TO SMALL SCALE FARMERS IN
NIGERIA
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2.3
LOAN PROCEDURES IN BANK OF AGRICULTURE
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2.4
SMALL SCALE FARMERS IN NIGERIA
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2.5
PROBLEMS IN ACCESSING AND REPAYMENT OF LOANS BY SMALL SCALE FARMERS
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2.6 PROSPECTS OF LOAN
FINANCING TO AGRICULTURAL SECTOR PARTICULARLY SMALL SCALE
FARMERS
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0
INTRODUCTION
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3.1
RESEARCH DESIGN
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3.2
AREA OF STUDY
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3.3
POPULATION OF THE
STUDY
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3.4
SAMPLE SIZE AND SAMPLING TECHNIQUE
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3.5
RESEARCH INSTRUMENT USED
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3.6
AMDINISTRATION OF THE
INSTRUMENT
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3.7
TECHNIQUES USED FOR DATA
ANALYSIS
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CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND
INTERPRETATION
4.1
INTRODUCTION
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4.2
DATA PRESENTATION -
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4.3
DATA ANALYSIS
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4.4
ANALYSIS OF DATA COLLECTION
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4.5
SUMMARY OF FINDINGS
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CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1
SUMMARY -
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5.2
CONCLUSION
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5.3
RECOMMENDATIONS
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BIBLIOGRAPHY
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APPENDIX
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APPENDIX
II
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Nigeria has been endowed with
abundant human and material resources. Yet, imports bills for good and
agricultural raw materials have been on the increase over the years.
Prior to political independence and
immediately after the country got its independence, it was not only sufficient
in food production and agricultural raw materials, but was generally having
surplus for export.
Statistics from the Central Bank of
Nigeria indicates that the agricultural sectors share of the gross domestic
product G.D.P was as high as 65 percent in the sixties but has been on the
decline since then. In 1973, it contributed 31 percent, while only 23 percent
in the 1990s At the same time, food importation has been on the increase.
Concerted efforts have been made by
government, federal, state and local government and by organizations and
co-operative union towards improving the delivering agricultural output.
More than 80 percent of the Nigerian
agricultural producers are peasant farmers who are low-income earners. Lack of
credit facilities to these categories of farmers is greatly happening the
needed change from subsistence farming to large-scale mechanized farming.
Inadequate or lack of credit facilities is one of the most important factors
that make it difficult for peasant farmers to innovate new methods of farming
and implementation of research finding cannot be adopted if access to financial
resources is restricted or not in existence.
For the expected transformation to
take place in the rural sector, the technology and technique of agricultural
cultivation, the quality of seeds planted, storage and marketing facilities
must be improved to enable such improvements to take place. Financial resources
through rural credit must be adequate it is quite obvious that most peasant
farmers do not possess enough resources of their own to acquire such basic
implements like tractors and animals driver ploughs, spraying equipments and
pay for fertilizers and other inputs which are usually very expensive.
There are quite a number of sources
of agricultural credits available to farmers these are categorized into two
mainly institutional credits in Nigeria are obtained from commercial banks,
cooperative societies, bank of agriculture, while the non-institutional sources
of credits includes money lenders, landlords, shopkeepers relations and
friends, which are more assessable to the peasant farmers.
For peasant crops like cocoa and
palm trees as opposed to food crops, long term credit is required which is
obtainable only from banks. The nationwide network of branches of various banks
is not doubt a great advantage and importantly no doubt facilitate flow of
funds to the grass root. However, this has not been achieved due to a number of
problems. Which are:
i.
Natural hazards which are rampant these days e.g. flood and diseases to live
stocks.
ii.
Untimely approval of loans
iii.
Lack of adequate supervision by the extension workers in charge of the scheme.
Most of these farmers need supervision to ensure the right usage of the funds
and to discuss problems with them.
iv.
Most importantly amongst the problems is that of inadequate funds which the
banks are battling to overcome.
The birth of Bank of Agriculture
B.O.A formerly known as Nigeria Agricultural Cooperative and Rural Development
Bank [NACRDB] limited as the single largest development finance institution in
Nigeria followed the successful merger of the former People’s Bank of Nigeria
[PBN], the defunct Nigerian Agricultural and Cooperative Bank which is now Bank
of Agriculture and the risk assets of the Family Economic Advancement Programme
[FEAP] in October, 2000. Thus; Bank of Agriculture [B.O.A] is dedicated
primarily to agricultural financing of small and medium levels, as well as
micro financing of small and medium scale enterprises.
In October 2010, the name was
changed from Nigeria Agricultural Cooperative and Rural Development Bank
[NACRDB] limited to Bank of Agriculture Limited. The bank is a registered
limited liability company that is wholly owned by the Government of the Federal
Republic of Nigeria with the share capital fully subscribed by the Federal
Ministry of Finance corporate 60% and the Central Bank of Nigeria 40%. The
Bank’s broad mandate encompasses saving mobilization and the timely delivery of
affordable credit to meet the funding requirements of the teeming Nigerian
population in the agricultural and non-agricultural sectors of the national
economy.
Bank of Agriculture (B.O.A) was
established as a national credit institution on November 24, 1972 and went into
operate in March 6, 1973. Today’s Bank of Agriculture Limited, actually took
its new name at the instance of the Nigeria Government. This is in the
government’s view was to reflect more vividly, the Bank’s commitment to
agricultural development through the promotion and financing of cooperatives.
Prior to the establishment of
(B.O.A) as an institutional lender to farmers, the financing of the Nigeria
Agricultural sector was essentially being handed by a variety of public
institutions. These include the fund for Agricultural and Industrial
Development, the regional local government Boards, development corporation and
the regional marketing Boards.
The general consensus however was
that these credit financing institutions failed due to some factors.
Agricultural experts say these factors range form “political interference,
inefficient project appraisal, monitoring and supervision” to law courage of
the farming population inadequate funding. Adoption of excessively rigid and
time consuming procedure for processing loan applications, low loan recovery
and untimely loan disbursement.
Thus the bank of Agriculture is
today a welcome relief to the Nigerian farmers. The Bank’s inauguration marked an
important landmark in the history of nation’s agricultural development and it
has continued to serve as a national financial institution devoted entirely to
investing in all aspect of the agricultural industry.
1.2 STATEMENT
OF THE PROBLEM
The main objective of banking of
agriculture is to finance agricultural production both at large and small scale
special grants and large sums of funds is apportioned to the bank by the
government on annual basis for disbursement to farmers. However, the output from
agricultural sector continue to be on the downside year after year. Despite the
country’s past fertile land and abundant labour, large percentage of the
country’s import is in food majored in rice, wheat, maize and other
agricultural raw-materials, which were produced and imported in the past story
of agricultural productivity in Nigeria.
It is against this background that
the researcher intends to study the problems and prospects of lending to small
scale farmers by the Bank of Agriculture (B.O.A) limited.
1.3 OBJECTIVES
OF THE STUDY
The research aimed at discovering
the problems and prospect of lending to small scale farmers via the bank of
Agriculture. The research therefore intends to achieve the following
objectives:
1.
To find out the terms and conditions for agricultural loans.
2.
To understand the procedures involved in the lending process by the Bank.
3.
To find out the constraints faced by the bank in disbursement and repayment of
loans by small scale farmers.
4.
To assess the prospects of lending to small farmers by the bank of agriculture.
1.4 RESEARCH
QUESTIONS
The research question put forward are as follows:
i.
What is the nature and extend of lending to small scale farmers?
ii.
What is the problems of lending to small scale farmers
iii. Are
there bright futures to agricultural financing in Nigeria?
iv. Do small
farmers have access to finance offered by the bank of agriculture.
1.5 SIGNIFICANCE
OF THE STUDY
The importance and significance of
this study cannot be over emphasized. The research will gain in-depth knowledge
about the activities of bank of agriculture in financing agricultural
production, in addition, the public too will find this project very informative
and useful.
Secondly, this study will serve as
an important reference material for student in future that will be faced with
the task of project working in similar area. The finding of this project will
provide adequate information for their project writing.
Lastly, it will go a long way in
assisting the government in Agricultural policies concerning
agricultural-lending schemes.
1.6 SCOPE OF
THE STUDY
The researcher work is restricted
within Bank of Agriculture (B.O.A) limited. And only in the small scale
agricultural producers (farmers) lending scheme. The researcher wish the
projects is designed to be carried out on all the banks operated schemes but,
this cannot be achieved due to a lot of constraint ranging from lack of comprehensive
report on all the scheme the bank operated in the head offices. This can only
be found in the branch offices who operate the schemes. Financial constraints
and time factors contributes as to why the researcher could not travel far and
wide in order to obtain the date for the research work.
The inaccessibility to some relevant
data classified as “confidential” created a set back to this work. The
researcher also encountered problems of poor response from management staff who
complained they are not in position to comment.
1.7 LIMITATION
OF THE STUDY
Lending is a complicated case that
is likely to tarnish the image and integrity of the affected bank. Because of
this, affected banks do not always willingly give out information about the
case study. Therefore getting information about the problems and prospect of
lending to small scale producers on the bank is proving more difficult as
expected.
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