Asenath Gadanakis 2019

Creditsources,acces
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livestockfarmersinNig
eria
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Agricultural Finance Review
Agricultural Finance
Credit sources, access and factors influencing credit
demand among rural livestock farmers in Nigeria.
Journal: Agricultural Finance Review
Manuscript ID AFR-10-2018-0090.R3
Manuscript Type: Research Article
Rural farmers, credit demand,, credit access, logit model, multinomial

Keywords:
logit model, livestock production
Review
Page 1 of Agricultural Finance Review
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3 Topic: Credit sources, access and factors influencing credit demand among rural livestock
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5
farmers in Nigeria.
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7
8
9 Abstract:
10 Purpose -- Rural farmers’ access to farm credit in Nigeria has been very low, which affects
Agricultural Finance Revi

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13 farm performance, and credit providers have blamed for the problem in the sector. While this
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15 general perception persists, the fact may be the case of credit demand, rather than just the risk-
16
17 averse attitudes of credit providers. The research, therefore, sets to investigate significant
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19
factors influencing farmers’ credit demand to ensure efficient credit provision.
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21
22 Methodology -- The research adopted mixed methods for an in-depth investigation into the
23
24 problem. There were 216 research participants split into equal halves of men and women from
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26 six Local Government Areas of Nasarawa State. Data collection methods employed structured
27
28
29 interviews, focus group discussions, close/open-ended, and key informant interviews.
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31 Analytical tools involved descriptive statistics, the logit and multinomial logit models to
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33 determine participants’ socioeconomic characteristics, sources of credit, access, factors
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35
36 influencing credit demand generally, and from the various sources of credit identified.
37
38 Findings -- Findings reveal only 47.6% of the participants accessed credit, with fewer women
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40 accessing than men. The most accessed forms of credit are from the semi-formal sources, with
41
42
more men accessing from formal sources and more women from non-formal sources. Factors
43
44
45 having significant influence on credit demand generally are education, group membership and
46
47 household size. And from formal, semi-formal and non-formal credit sources are 1); education,
48
49 information on sources of credit, deposits, household size and marital status, 2); education,
50
51
52 deposits, group membership, household size, flock size, and 3); education, group membership,
53
54 and gender from the non-formal credit providers, respectively.
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1
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3 1.0 Introduction
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5
Scholarly findings from Shahab et al. (2018), Akudugu et al. (2011 and 2012b), Kokoye et al. (2013),
6
7
8 and other scholars have professed credit to be a development tool so powerful to capitalize farm
9
10 households to invest and adopt improved farming methods and production technologies to enhance
11

12 productivity. Schindler (2010), Akudugu (2011), Deb and Suri (2013), and other scholars acknowledge
13
14 that credit provides working capital particularly, in rural areas where many of the impoverished people
15
16 live. Thus, credit is capable of stabilizing household consumption to reduce poverty. Scholarly findings
17
18 have continued to confirm credit to transform the living conditions of beneficiaries by increasing their
19
20 farm productivities to enhance income as well as boosting their self-confidence and well-being
21
22 (Akudugu, 2011; Akudugu et al. (2012b). In Nigeria for example, Ogbuabor and Nwosu (2017),
23
24
Emesefi and Yusuf (2014), and other scholars acknowledge credit to increase farm output significantly,
25
26
hence farm family income and help the poor towards accumulating their wealth to invest in farming. It
27
28
29 is an instrument that could possibly transform the traditional agricultural sector into modern form and
30
31 create employment opportunities. Hence, credit is a critical component that could tackle productivity
32
33 problems and reduce extreme poverty, supporting the generation of self-employment in the rural sector
34
35 farming and non-farming activities for investment in working capital, and one of the core strategies for
36
37 alleviating poverty in most developing countries (The World Bank, 2017; Tiken Das, 2018)
38
39
40 Livestock production particularly is known to be of massive importance to the poor and one of the
41
42 principal components of the rural and national economy. The International Fund for Agricultural
43
44 Development (IFAD) (2006; 2004) and Food and Agricultural Organisation (FAO) (2017) acknowledge
45
46
that livestock keeping diversifies production and reduces the risks of economic losses resulting from
47
48
49 crops destroyed by adverse climatic conditions or diseases. It is a natural and economic capital which
50
51 contributes to human diets and livelihoods through home consumption and income generation, acting
52
53 as a live bank, imparting social status, and providing draft, transport, and fertilizer, especially for
54
55 resource-poor farmers. If the production of livestock is well integrated into the household economy, it
56
57 will allow more efficient use of family labour, provide a secure food and cash income spread over the
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60
1
39
59 entire year, and manure as fertilizer that improves the soil, thus enhancing crop production (World
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2
Page 3 of 39 Agricultural Finance Review
1
2
3 Bank, 2009). Given the relative importance of the livestock sector to rural smallholders, one question
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5
that arises is the extent to which farmers access credit to facilitate their taking advantage of developing
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7
8 livestock production and other livelihood activities.
9
10
11 Although agriculture including livestock production remains a vital component of the country’s

12
13 economy contributing about 41% of GDP, and employing about 70% of the active population, the
14
15 agricultural sector receives less than 10% of the annual budgetary allocations (Ojo and Adebayo, 2012).
16
17 Consequently, the sector has significantly underperformed over the years, failing to be self-sufficient
18
19 in supplying food in the quantity and quality to feed the continually growing population. For example,
20
21 Ojo and Adebayo (2012) report that food production in Nigeria increases at the rate of 2.5% per annum
22
23 while population increases at 2.8% which does not match the demand for food; recorded at 3.5% per
24
25
annum. There is widespread food insecurity in the country due to the food demand-supply gap resulting
26
27
28 in rising food prices and imports. The most significant problem in the food sector in Nigeria is that of
29
30 low animal protein in the diets of a large proportion of the population, especially in the rural areas where
31
32 about 70% of its population lives (FAO, 2017; Mubarrak et al., 2016). Among other factors responsible
33
34 for the precarious food insecurity such as land, agricultural research and policy, technology,
35
36 infrastructure, and access to support services such as extension services; Ojo and Adebayo (2012), and
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38 the Federal Ministry for Agriculture and Rural Development in Nigeria (FMARD) (2008) confirm
39
40 inadequate financing to be the significant problem. For instance, the allocation of credit to the Nigerian
41
42 agricultural sector by commercial banks declined from about 10.8% of total lending in 1985 to only
43
44
about 3.7% in 2014 (Udoka et al., 2016). Some scholars confirm the declining trend in credit provision
45
46
47 by the financial sectors are due to the risks and uncertainties in Nigerian agriculture, especially to small
48
49 holders (Famogbiele, 2013; CBN, 2014). Hence, financial providers in Africa, including Nigeria, have
50
51 been criticised for the precarious condition of agricultural production (Alliance for a Green Revolution
52
53 in Africa, 2012; IFPRI, 2014). While the declining trend of credit allocation to farm households
54
55 in Nigeria has been reported by many scholars to be a problem of supply, it may factly be the
56
57
58 case of demand. Hence, this study seeks to understand the sources of credit to livestock farmers
59
60 in the region and the main factors influencing their demand for credit. The study used
3
Agricultural Finance Review Page 4 of 39
1
2
3
quantitative and qualitative methodologies to critically examine the issues at hand, to
4
5
6 comprehend better factors that are most likely to lead to farmers’ demand for credit in the first
7
8 place. Findings from the study are triangulated to achieve study objectives properly.
9
10
11 The use of mixed methodologies in researching problems of this nature is rare in Nigeria,

12
13
14 especially in Nasarawa state, because scholars most often use quantitative methods alone (see
15
16 for example; Girei et al., 2016 and Etonihu et al., 2013). The findings from this study are robust
17
18 and are hoped to enhance knowledge among credit providers in the region about farmers’
19
20
requirements for credit. Moreover, the policy recommendations would help the government
21
22
23 and financial institutions to tackle issues identified while devising financial innovations aimed
24
25 at sustainably providing credit services tailored to the needs of farmers (IFPRI, 2014; Adeoye
26
27
and Ugalahi, 2017).
28
29
30
31 1.2 Study objectives
32
33 Objective I: Identify and describe the sources and features of credit to small rural holders (particularly
34
35 livestock farmers)
36
37 Objective 2: Determine farmers access to credit
38
39 Objective 3: Investigate significant factors influencing farmers decision to borrow from the various
40
41 credit providers.
42
43
44 2.0 Literature review
45
46 2.1 Financing the rural small sector farming in Nigeria
47
48 Small scale production is of enormous importance to economic growth and social development
49
50 in Nigeria. Notably, the small rural sector is vital for the mobilisation of untapped financial
51
52 resources, conservation of foreign exchange, utilisation of local resources and could present
53
54
55 reliable avenues for economic integration, and the transformation of the traditional sector into
56
57 modern form, as well as the creation of employment opportunities. According to Owualah
58
59 (1998), small sector farming provides opportunities for training in skill acquisition to enhance
60
4
1
2
3
proper management of livelihood activities for low-income earners. However, poor access to
4
5
6 credit has been affecting its growth. Hanson and Menezes (1971) remarked that people borrow
7
8 money not because they want it for their own sake but only because it gives them command
9
10 over goods and services. In other words, nobody will seek a loan unless they consider that the
11

12
13 value of the satisfaction to be derived from the goods or services on which the money is to be
14
15 spent for is at least equal to the interest that must be paid. As such, loan finances accessed by
16
17 the smallholders could increase family income and help the poor towards accumulating their
18
19
20 capital to invest in employment generating activities (Germidis et al., 1991).
21
22
23 2.2 Credit sources and features in Nigeria
24
25 In Nigeria, the major sources of finance available to rural farmers are categorised into three
26
27
groups, namely; formal, semi-formal and the non-formal credit institutions. The semi-formal
28
29
30 and non-formal credit sources are further categorised as informal credit institutions/markets
31
32 (Badiru, 2010). Formal credit institutions consist of the country’s official and commercial
33
34 banks such as the Nigerian Agricultural Bank (NAB), the Nigerian Industrial Development
35
36
37 Bank (NIDB), the state government-owned credit institutions and Micro Finance Institutions
38
39 (MFIs), Private and Merchant Banks, and Finance Houses. The semi-formal sources of credit
40
41 comprise of the NGOs, Cooperative Societies and support groups, farmers’ associations and
42
43
44 the rotating savings and credit associations (ROSCAs). The final group are the non-formal
45
46 credit institutions, these sources of credit involve money lenders such as merchants, traders,
47
48 loan sharks, rural shop keepers, clubs and saving societies like “Esusu”; “Ajo”, friends,
49
50
relatives, spouses and so on (Badiru, 2010; Okojie, 2010).
51
52
53
54 The formal credit institutions operate in a more structured way, providing financial services to
55
56 its customers based on membership deposit and collateral. These sources operate under strict
57
58
and complex rules and conditions for accessing credit and are deposit-based with the
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60
5
1
2
3
requirement of physical collateral for security. More straightforward rules operate with formal
4
5
6 Micro Finance Institutions, but they also require physical collateral, while the Nigerian
7
8 Agricultural Bank requires peer collateral. Thus, accessing credit from these institutions require
9
10 customers to have an account with the banks and tangible or intangible collateral security.
11

12
13
14 The semi-formal sources of credit in Nigeria are set up, owned and managed by their members.
15
16 They are also democratically operated, so their policies and programs are set to adapt to the
17
18 rural environment and their members. These sources of credit were inspired by the non-formal
19
20
system to better respond to the needs of the rural population and to correct the negative aspects
21
22
23 of the non-formal credit markets. The semi-formal sources of credit provide loans to local rural
24
25 and urban populations who do not have access to formal credit institutions, so that they can
26
27
obtain loans at conditions suitable to their needs and at rates which are better than the non-
28
29
30 formal credit sources (Badiru, 2010; Okojie et al., 2010). Lastly, the non-formal credit sources
31
32 give loans in cash or in kind to be reimbursed in cash or kind; often in agricultural produce
33
34 when advanced to farmers. Credit accessed from these sources does not usually require a
35
36
37 deposit relationship, and no collateral is required (Badiru, 2010). In Nigeria, generally,
38
39 commercial banks and other formal credit institutions fail to cater to the credit needs of rural
40
41 populations because of their lending terms and conditions. It is the rules and regulations of the
42
43
formal financial institutions that have generated the idea that the poor are not bankable, and
44
45
46 since they cannot afford the terms, they are therefore considered not creditworthy (Adera,
47
48 1995). Much effort has been invested in overcoming the widespread lack of financial services,
49
50
especially among small rural holders through the expansion of credit in the rural areas in
51
52
53 developing countries, including Nigeria. However, a majority still have limited access to
54
55 credit, especially from the formal credit institutions to support their private livelihood activities
56
57 (Okojie et al., 2010 and Badiru, 2010). As such, the informal sector finance remains the major
58
59
60
6
1
2
3
sources of credit to the rural sector in Nigeria, which provide easier access to credit facilities
4
5
6 for the small rural holders.
7
8
9 2.3 Demand for credit by the small rural holders in Nigeria and access.
10
11 Many socio-economic factors play an essential role in determining the demand for credit by an

12
13
14 individual farmer/entrepreneur. Firstly, it is a preference, which may be influenced by factors
15
16 such as age, gender, marital status, education, group membership, level of income, and so on.
17
18 Secondly is the price or cost of the commodity. Thirdly is the borrower’s preference among the
19
20
alternatives available. Just as in the theory of demand for goods and services and prices, the
21
22
23 purchasing decisions of consumers and quantity purchased is impacted by the prices of
24
25 commodities demanded (Saleemi, 2000; Mudida, 2003). In other words, when deciding to
26
27
borrow, an individual look at the cost of credit, the available alternatives, the conditions of
28
29
30 borrowing from alternatives, and the socio-economic characteristics of borrowers. These put
31
32 together give bases for consideration to borrow from the alternative sources. For example, if
33
34 borrowing from formal credit sources proves expensive, borrowers are likely to turn to informal
35
36
37 sources and vice versa. This is simply on the basis that if the cost of credit goes up, the marginal
38
39 utility per unit price raised from that credit goes down. The borrower, therefore, chooses to
40
41 either not consume or consume less of the credit. The concept of utility and marginal utility
42
43
explains consumer demand on a commodity. The utility is the capacity or power of a
44
45
46 commodity to satisfy the desire of a user. If credit borrowed will satisfy the financial needs of
47
48 a borrower, then credit has utility (Saleemi, 2000). The main objective of any borrower is to
49
50
maximise satisfaction out of any finances borrowed, given or self-made. As such, the
51
52
53 conditions of accessing credit from the alternative markets are taken into consideration before
54
55 deciding to borrow/access credit.
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57
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60
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Conditions for accessing credit by small rural farmers in Nigeria vary from one credit
4
5
6 institution to another. For example, Badiru (2010) reports that the Central Bank of Nigeria’s
7
8 (CBN) guaranteed loans through commercial banks require customers to have an account with
9
10 the bank with tangible or intangible collateral security (sometimes with savings/deposits).
11

12
13 Semi-formal finance institutions provide credit based on membership deposit and peer
14
15 collateral, and the non-formal credit providers usually do not require a deposit or collateral;
16
17 however, they charge high-interest rates on the basis that no collateral is provided. Sometimes
18
19
loans from the non-formal credit institutions may be provided in the form of production inputs.
20
21
22 It is estimated that only 2.5% of total CBN loans and advances are directed to small scale
23
24 farmers in Nigeria (CBN 2008; Badiru, 2010). Badiru (2010) confirms that credit amounts
25
26
accessed by farmers from formal credit markets vary from N20, 000.00 (approximately £40.00,
27
28
29 with intangible collateral) and up to N10, 000,000.00 (approximately £20, 000.00 with tangible
30
31 collateral). Credit amounts accessed from RoSCAs, Cooperative Societies, Credit Unions and
32
33 the NAB vary at any point in time, depending on membership strength and the total
34
35
36 contribution by the group. However, average loans from these sources vary from N5,
37
38 000.00(approximately £10.00) to N20, 000.00 (approximately £40.00).
39
40
41 The small rural holders in Nigeria have limited ideas about the nature of formal financial
42
43
44
systems because they have little or no access to information concerning these sources. Firstly,
45
46 because most formal institutions perceive small rural holders as high-risk clients because the
47
48 subsistent nature of their production. Hence, they are hesitant to grant them loans because they
49
50
do not provide good enough returns. Secondly, with the problem of illiteracy and poor
51
52
53 management knowledge, smallholders are discouraged from accessing credit from formal
54
55 credit institutions because of the administrative procedures, paperwork and provision of
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57 guarantors and collateral. Thirdly, formal finance institutions are mostly located in the urban
58
59
60 area, hence the transaction costs of transport including interest rates and time spent in an
8
1
2
3
application and waiting are usually too high for rural farmers. These factors among others affect
4
5
6 the integration of rural farmers into the formal finance system (Okojie et al., 2010). The
7
8 implication is that most of them access credit from the informal sector which is usually in small
9
10 amounts, short term with very high-interest charges, untimely supply, and unconducive
11

12
13 repayment conditions (Okojie, 2010; Anyanwu, 2004; Badiru, 2010; Philip et al., 2009). As
14
15 such, farmers may not necessarily derive the benefit required from credit accessed from semi-
16
17 formal credit sources, thus, becoming financially excluded, and dependent only on their own
18
19
income for productive purposes which is often meagre, rendering their productive activities to
20
21
22 be marginal (Okojie, 2010, Fletchner and Kenny, 2011 and World Bank, 2008a).
23
24
25 2.4 Financial literacy and their implications on credit access
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27
Financial literacy is about empowering and enlightening consumers so that, they are
28
29
30 knowledgeable about finance in a way that is relevant to their lives and enables them to use
31
32 this knowledge to evaluate financial products and make informed decisions. Moreover,
33
34
financial education is the process by which financial consumers improve their understanding
35
36
37 of financial products and concepts through information, instruction and objective advice to
38
39 enable them to develop the skills and concepts required to become aware of financial risks and
40
41 opportunities to make informed choices, and know where to go for financial products to
42
43
44 minimise risks (Collins and O’Rourke, 2010). Financially educated consumers would benefit
45
46 the financial sector to make a useful contribution to real economic growth and poverty
47
48 reduction. Building financially literate and capable populations through financial education
49
50
could have enormous future benefits for any economy (Guiso and Viviano, 2015).
51
52
53
54 Many scholarly findings in Nigeria indicate that most smallholder farmers have a limited
55
56 understanding of financial products and services. A survey in 2008 showed that about 80% of
57
58
Nigerians do not have bank accounts with formal financial institutions which make them
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60
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1
2
3
financially excluded. This is due to their low-income status, low level of education, and low
4
5
6 level of financial literacy (Credit Awareness Nigeria.com, 2013).
7
8
9 In a country with a diverse social and economic profile like Nigeria, financial literacy is
10
11 particularly essential for rural people. A better understanding of how the financial markets

12
13
14 work, what they offer, as well as how to utilise financial products could create a viable financial
15
16 system. Building financial capacity through financial education in Nigeria will help consumers
17
18 to acquire the skills and knowledge to be confident, self-reliant and capable of making their
19
20
own financial decisions thereby helping them to assume more responsibility in their financial
21
22
23 decisions while minimising risks as they navigate the financial markets to ensure the smooth
24
25 functioning of the financial markets (Credit Awareness Nigeria.com, 2013).
26
27
28 3.0 Materials and methods
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30
3.1 Description of the study location
31
32
The study location is Nasarawa State in Nigeria, which is centrally located in the middle belt region of
33
34
35 the country with state capital in Lafia (Marcus and Binbol, 2010). Nasarawa state falls within the
36
37 southern guinea savannah zone characterized by a tropical sub-humid climate with two distinct seasons;
38
39 the wet season, lasting about six months (May – October) and the dry season occurring between
40
41 November and April, with annual rainfall figures ranging from 1100mm to about 2000mm.
42
43 Temperatures are generally high during the day, particularly between March and April with mean
44
45 monthly temperatures ranging between 20°C and 34°C (Marcus and Binbol, 2010; Rahman et al., 2010).
46
47 The main economic activity in Nasarawa State is agriculture. The state is rich with fertile agricultural
48
49
land, rivers, streams, as well as a large active population that can sustain a highly productive agrarian
50
51
sector. The principal crops grown include maize, rice, sorghum, millet, cowpea, groundnut, yam,
52
53
54 cassava, soybeans, oil palm, beniseed, melon, and bambara nuts. The livestock industry plays a very
55
56 significant role in the physical and socio-economic wellbeing of the population (Rahman et al., 2010),
57
58 with a considerable number of different livestock species in the state including cattle, goats, sheep, pigs,
59
60 rabbits and poultry (Ibid).
10
39
1
2
3 Nasarawa state consists of three senatorial districts: west, central and south senatorial districts, and
4
5
thirteen local government areas. The southern senatorial district includes five LGAs; Karu, Keffi,
6
7
8 Kokona, Nasarawa, and Toto. The central senatorial district consists of Akwanga, Nasarawa Eggon,
9
10 and Wamba LGAs and the western senatorial district consists of Awe, Lafia, Keana, Doma and Obi
11

12 LGAs (ibid). The state has a total land area of 27,137.8 square kilometres and a population of about 1.8
13
14 million people, with a density of about 67 persons per square kilometre (NPC, 2016; Marcus and Binbol,
15
16 2010).
17
18
19 3.2 Approach to the study, data sources and collection strategies, and sampling procedure
20
21 The study adopted the pragmatist paradigm using mixed methodologies in its inquiry. Structured
22
23 interviews consisting of closed and open-ended questions, focus group discussions (FGDs), and key
24
25
informant interviews (KIIs) were instruments used for primary data collection. The multistage sampling
26
27
techniques were adopted for the selection of a total of 216 research participants from six Local
28
29
30 Government Areas (LGAs); Obi, Lafia, Nasarawa Eggon, Kokona, Akwanga and Karu, and 18 villages
31
32 who were used for the survey. Participants of various FGDs conducted were recruited with the help of
33
34 Fadama III desk officers and livestock assistants of the various livestock units of the six LGAs
35
36 investigated. There were at least two farmers; men and women from each of the three villages examined
37
38 in each LGA involved in the FGDs to ensure representation. The KIs were two staff each from credit
39
40 institutions picked up at random in the LGAs investigated.
41
42
43 3.3 Field data collection
44
45 First, structured questionnaires consisting of closed and open-ended questions were administered to 216
46
47
selected respondents in six LGAs of Nasarawa State, where quantitative and qualitative data were
48
49
50 obtained. The survey covered aspects such as the socio-economic characteristics (SECs) of participants,
51
52 their sources of credit, conditions for accessing credit, and reasons for not accessing credit. Questions
53
54 were carefully planned and considered beforehand to achieve research objectives and were pre-tested
55
56 and refined before administering. Interviews enabled the examining of the participants’ depth of
57
58 understanding of the subject matter and were useful with regards to contacting large numbers quickly
59
60 and replicating interviews to produce standardized and reliable form data. However, because questions
11
39
1
2
3 are predetermined, the depth of responses was limited to the set questions. To upset this; a guide
4
5
reflecting the study objectives was used for FGDs. Participants of various FGDs conducted were
6
7
8 recruited with the help of the desk officers of Fadama III Project and livestock assistants of the livestock
9
10 units of each of the six LGAs investigated. There were at least two farmers; male and females from
11

12 each of the three villages investigated in each LGA involved in the FGDs to ensure representation.
13
14 Through FGDs, members participated in discussions to explore sources of credit, access, factors
15
16 influencing demand for credit, reasons for not accessing credit and other sources of income for investing
17
18 in livestock production. Thirdly, KIIs were used to obtain information from carefully selected credit
19
20 providers who are thought to have in-depth knowledge about credit facilities and mode of access. The
21
22 KII guide reflected the objectives of the study. KIIs conducted enabled the researcher to acquire some
23
24
knowledge about the credit facilities available to farmers in the study area and explored further on the
25
26
conditions these institutions apply when granting loans to farmers. This information was used to
27
28
29 determine factors that farmers are likely to consider given the conditions of access and alternatives
30
31 available to them before deciding to borrow.
32
33
34 3.4 Data analysis
35
36 3.4.1 Examining credit sources and features, and factors influencing access
37
38 The various sources of credit, their features and access to farmers have been identified through surveys
39
40 and KIIs. Also, research participants were asked to indicate the factors that affect their decision to
41
42 borrow from the different sources identified, and these were corroborated with data from KIIs. Factors
43
44 identified were then modelled using the logit and multinomial logistic regression models (MNLM).
45
46
47
a. The logit model (LM)
48
49
50 The study employed the threshold decision-making theory proposed by Hill and Kau (1973) and
51
52 Pindyck and Rubinfeld (1998), in the logit model. The application of this theory in the context of this
53
54 study is that; given a specific set of factors; there is a reaction threshold that borrowers must reach
55
56 before making loan decisions. Thus, at a value of stimulus below the threshold, there will be no decision
57
58 to borrow, while at the critical threshold value, borrowing is observed.
59
60 This reaction is modelled using the relationship:
12
39
1
2
3
(1.1)
4
5
6 Where Yi is equal to one (1) when a decision is made to borrow and zero (0); otherwise; this means:
7
8 Yi = 1 if Xi is greater than or equal to a critical value, X*; and Yi = 0 if Xi is less than a critical value,
9
10
11 X*.

12
13
14 X* represents the combined effects of the independent variables ( ) at the threshold level. Equation
15
16 1.1 represents a binary choice model involving the estimation of the probability of credit access (Yi)
17
18 as a function of independent variables (Xi).
19
20
21 The empirical model for the logit estimation is specified as follows:
22
23
24
25 (1.2)
26
27
28 Where Yi is the observed response for the ith observation of the response variable, Y.
29
30
31
32 Are the log-odds in favour of farmers’ decision to access credit.
33
34 Yi = 1 for farmers who decide to borrow
35
36
37 And
38
39
40 Yi = 0 for those who decide not to borrow), and
41
42
43 Xi’s = factors that promote or prevent farmers’ access to credit; X1-X15, and are defined as follows:
44
45
46 X1 = Age in years (+)
47
48
49 X2 = Age in years squared (-)
50
51
X3 = Flock size in numbers (+)
52
53
54 X4 = Marital status of farmer, dummy (1= Married: 0= Single) (+)
55
56
57 X5 = Collateral requirements (perception), dummy (1= if credit access depends on collateral; 0=
58
59 Otherwise) (+)
60
13
39
1
2
3 X6 = Education (years) (+)
4
5
6 Primary= 1-6 years
7
8 Secondary=7-12 years
9
10 Tertiary= >12
11

12 X7=Deposit requirements (perception) (1= if credit access depends on deposits; 0=Otherwise) (+)
13
14 X8 = Interest rate (perception) (1= if access to credit depends on interest rate: 0=Otherwise) (+)
15
16
17 X9 = Farming experience (years) (+)
18
19
X10 = Access to extension/veterinary services (+)
20
21
22 X11 = Group membership, dummy (1 = having group membership; 0 = Otherwise) (+)
23
24
25 X12 = Income level (perception), dummy (1 = if access to credit depends on income level;
26
27 0 = Otherwise) (+)
28
29
30 X13= Household size (numbers) (+)
31
32
33 X14 = Information on sources of credit, dummy (1 = having information on credit sources; 0 =
34
35 Otherwise) (+)
36
37
38 X15= Gender: dummy (1 =men and 0= women) (+).
39
40
Ɛ = the error term assumed to be normally distributed.
41
42
43
The signs in parentheses indicate the a priori expectations of the direction of change in the probability
44
45
46 of access to credit due to a unit change in any of the explanatory factors in the model.
47
48
49 b. The multinomial logit model (MNLM)
50
51 To be able to assess the factors that affect farmers’ decision to borrow from either of the three credit
52
53 sources identified, the MNLM was applied. In this scenario, the decision makers were faced with choices
54
55 involving more than two alternatives. If a farmer were to access credit from these three choices; formal,
56
57 semi-formal and non-formal credit sources, which one option does he/she choose? In each of these
58
59 scenarios, the observed decision is related to a set of explanatory variables. The estimation and
60
14
39
1
2
3 interpretation of the MNLM are, in principle, like the logit model; to predict the probability that an
4
5
individual with a particular set of characteristics chooses one of the alternatives. For example, given that
6
7
8 a farmer obtained a loan, what is the likelihood that they would choose one of the three alternatives;
9
10 formal, semi-formal or non-formal credit providers? The factors affecting this choice are variable. As in
11

12 the logit model, the probability that the ith farmer will choose alternative j is as follows:
13
14
15 Pij =P [individual i chooses alternative j]
16
17
18 With these j=3 alternatives, denoted by j=1, 2, or 3.
19
20
21
Assuming there is a single explanatory factor, Xi, then, in the multinomial logit specification, the
22
23
probabilities of individual i choosing alternatives j= 1, 2, or 3 are:
24
25
26
27
28 Pi1 = 1 , j= 1 (1.3a)
29
30 1+ exp (β12+ β22xi)+exp (β13+ β23xi)
31
32
33
34 Pi2 = exp (β12+ β22xi) , j= 2 (1.3b)
35
36 1+ exp (β12+ β22xi)+exp (β13+ β23xi)
37
38
39
40
41 Pi3 = exp (β13+ β23xi) , j=3 (1.3c)
42
43 1+ exp (β12+ β22xi) +exp (β13+ β23xi)
44
45
The parameters β and β are specific to the second alternative, and β and β are specific to the third
46 12 22 13 23
47
48 alternative. The parameters specific to the first alternative are set to zero to solve an identification
49
50 problem and to make the probabilities sum to one. Setting β11= β21=0 leads to the 1 in the numerator of
51
52 Pi1 and the 1 in the denominator of each part of (1.3). Specifically, the term that would be there is exp
53
54 (β11 + β21) = exp (0+0xi) = 1. A distinguishing feature of the multinomial logit model in (1.3) is that
55
56 there are explanatory variables describing the individual, not the alternatives facing the individual.
57
58 Such variables are individual specifics (Xi). To distinguish the alternatives, different parameter values
59
60
are considered. For example: Let Yi1, Yi2 and Yi3 be indicator variables representing the choice made by
15
39
1
2
3 individual i. If alternative 1 is selected, then Yi1 = 1 and Yi3 = 0 and Yi2 = 0. If alternative 2 is selected,
4
5
then Yi1 = 0, Yi2 = 1, and Yi3 = 0. In the MNLM, everyone must choose one, and only one of the
6
7
8 available alternatives. As in the logit, the estimation of this model is by maximum likelihood estimation
9
10 (MLE). Suppose that three individuals choose alternatives 1, 2, or 3, respectively.

11
12
13 3.4.2 Choice of variables used for the logit and MNL estimation and justification for
14
inclusion
15
16 The age of farmers X1 measured in years is used as a proxy for maturity and experience in farming (X9)
17
18 and implies the potential ability to perform productive work and utilize and repay credit. It is expected
19
20 that age would have a positive influence on credit access because as farmers grow older, they acquire
21
22 more experience in production, therefore becoming confident in accessing credit for investment in their
23
24
productive activities (Shahab et al., 2018 and Fakayode and Rahji, 2009). Age squared (X2) was included
25
26
27 in the analysis to test for the quadratic nature of age. The assumption is that as farmers grow to pass
28
29 their economically active age, their involvement in economic activities including accessing productive
30
31 resources and credit would decline, thus would be negatively associated with access to credit all things
32
33 being equal. Flock size measured as count of livestock in numbers (X3) was included in the model as a
34
35 proxy for scale of operation which could influence credit access decisions -- increase in scale of
36
37 operation would increase revenue, thus credit access and vice versa (Jiao et al., 2018; Abedullah et al.,
38
39 2009). Marital status of farmers (X4) was used as a proxy for the agency of respondents. Given that in
40
41 the study area, marital status determines the type of economic activity one engages in and the number
42
43
of people in a household (X13; measured in numbers). The expectation was that it would positively
44
45
46 influence credit access decisions of farmers, and it was measured as a dummy (1 = married and 0 =
47
single). Household size (X ) was included in the model because farmers with large household sizes are
48 13
49
50 more likely to access credit than those with small household sizes because of the possibility of having
51
52 readily available farm labour from family members which might reduce the cost of production and
53
54 increase profit to guarantee credit repayment all things being equal (Shahab et al., 2018; Silong, 2017).
55
56 Collateral (X5) was included in the model because most formal lenders require borrowers to provide
57
58 collateral as security to access credit. This variable was measured as a dummy (1=where collateral is
59
60 required and 0= otherwise). The expectation was that farmers would be less likely to access credit where
16
39
1
2
3 collateral is required (Ololade and Olagunju (2018). Education (X6) is very important in accessing and
4
5
controlling productive resources including credit and one of the major factors that influence the decision
6
7
8 to participate in and access credit (CBN, IFC and World Bank, 2017 and Lukytawati, 2009). Education
9
10 in this study is considered in the model in three stages (primary education 1-6 years, secondary
11

12 education; 7-12 years and tertiary education as >12 years). The expectation was that acquiring more
13
14 years of formal education and financial literacy would be associated with an efficient credit application
15
16 and could increase farmers’ probability of accessing credit (Silong, 2017; Shahab et al., 2018). Deposits
17
18 (X7) are deemed important in accessing credit because people who have deposits as savings with lenders
19
20 can demonstrate that they can generate income to take care of their household needs and still have a
21
22 surplus (Samson and Obademi, 2018). It was measured as a dummy (1 for farmers who have savings
23
24
and 0; otherwise). It is expected that savings would influence borrowing positively. Interest rate level
25
26
(X8) was included in the model because farmers who perceived that the interest charges by lenders are
27
28
29 high are less likely to access credit from them and vice versa. It was measured as a dummy (1 for farmers
30
31 who perceived interest rates to be high and 0 otherwise). Access to extension/veterinary services (X10)
32
33 was measured as a dummy (1 for those who have access and 0; otherwise). Extension services provide
34
35 farmers with the technical know-how to confidently engage in farming activities. As such, it is expected
36
37 that increasing access to extension/veterinary services by livestock farmers would be associated with
38
39 increases in access to credit (Silong, 2017). Membership of a social/support groups (X11) was included
40
41 in the model because of the group lending approach adopted by many financial institutions, especially
42
43 in the rural areas. It was measured as a dummy (1 = having a membership of social/support group and
44
45
0; otherwise), and expected to be positively associated with increases in credit access (Silong, 2017).
46
47
48 Income level (X12) was included in the model because people who perceive their income levels to be
49
50 low may decide not to access credit, and the reverse is true. It was measured as a dummy (1 for farmers
51
52 who perceived that their income levels have an influence on their decision to borrow and 0; otherwise).
53
54 Access to information on the available sources of credit (X14) was included in the model because
55
56 knowing where to go for credit is likely to influence borrowing positively. This was measured as a
57
58 dummy (1 for those who access information on available credit sources and 0= otherwise). Finally, is
59
60
17
39
1
2
3 gender X15; it is included in the model because, in the rural context of Nigeria, men are more likely to
4
5
decide to access credit than women. This was measured as a dummy (1=men and 0 =women).
6
7
8 4.0 Empirical results
9
10 4.1 Background information about the research participants

11
12 Table 1 Descriptive statistics of selected SEC of farmers
13
14 Socio-economic factors Male: N=108 Female: N: 108
15 Frequency % Frequency %
16 Marital status
17 Single 13 12% 16 15%
18
Married 95 88% 92 85%
19
Education
20
21 No education
18 17% 45 42%
22 Primary education 24 22% 31 29%
23 Secondary education 46 43 20 18%
24 Tertiary education n 20 18% 12 11%
25
26 Access to extension /
27 veterinary services
28
29 Had access
30 55 51% 40 37%
31 Had no access 53 49% 68 63%
32 Group membership
33
34 Have no group
35 membership 52 66.7% 72 66.7%
36 Have group membership 22 33.3% 36 33.3%
37
38 Access to credit
39
40 Not accessed credit 52 48.1% 61 56.5%
41 Formal credit 22 20.4% 10 9.3%
42 Semi-formal credit 28 25.9% 21 19.4%
43
Non-formal credit 6 5.6% 16 14.8%
44
45
46 Min Max Mean Standard Min Max Mean Standard
47 Deviation Deviation
48 Age 20 78 38 13.6 20 79 39 12
49 Household size 2 35 14 7 2 31 14 6
50 Farming experience 2 48 9 9 2 30 7 5.5
51
Formal education 0 9 5 5.3 5.3
52 17 0 16
53
Flock size 5 91 19 14.4 5 78 16 14.6
54
55
56
57 The study participants were split equally between genders to account for gender differences in SECs as
58
59 well as in their demand for credit. Descriptive statistics reveal the mean age of the sampled male and
60
18
39
1
2
3 female farmers to be 38 and 39 years, with a minimum of 20years and a maximum of 78 and 79 years
4
5
for male and female farmers respectively. Male and female farmers have on average 9 and 7 years of
6
7
8 experience in small ruminant production respectively with a minimum of 2 years and a maximum of 48
9
10 and 30 years for male and female farmers respectively. 88% of male and 83% of female participants are
11

12 married. Analysis of the household sizes reveal mean household sizes of 14 and 13 for both male and
13
14 female farmers, with a minimum of 2 per household, and a maximum of 35 and 31 members for male
15
16 and female farming households respectively, and both genders have household sizes in the range of 10-
17
18 19 members. Many of the sampled female participants have acquired up to 5 years of formal education
19
20 up to a maximum of 16 years, and up to 9 years for male farmers with a maximum of 17 years. Overall,
21
22 144 of the respondents, comprising 72 each of male and female farmers have group membership with
23
24
the remaining 36 each of male and female participants having none. Also, 56 men corresponding to
25
26
52% of the sample of male participants accessed credit with 20.4%, 25.9% and 5.6% accessing from
27
28
29 the formal, semi-formal and non-formal credit institutions respectively.
30
31
32 On the other hand, 47 females corresponding to 44% accessed credit with 9.3%, 19.4% and 14.8%
33
34 accessing from the formal, semi-formal and non-formal credit institutions respectively in the production
35
36 years investigated (2010 and 2011). 51% and 37% of male and female participants have contacts with
37
38 extension/veterinary services. The distribution of respondents’ flocks’ size reared showed an average
39
40 of 19 for male farmers with a minimum of 5 and a maximum of 91 and an average of 16 with a minimum
41
42 of 5 and a maximum of 78 for women. Findings also reveal that 31% of women had flock sizes in the
43
44 range of 6-10 compared to 33% of men having flock sizes in that range.
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
19
39
1
2
3
4
5
6 4.2 Sources of credit to research participants and their features
7
8 Table 2 Credit sources and access by gender
9
10
Credit Men N=108 Men Women: N=108 Women Total N =216 Total
11

12
institutions with with men
13 access access and
14 to to credit women
15 credit N=47 with
16 N=56 access
17 to
18 credit
19 N=103
20 Frequency % % Frequency % % Frequency % %
21 Formal 22 20% 39% 10 9% 21% 32 15% 31%
22
credit
23
institutions
24
25 Semiformal 28 26% 50% 21 19% 44% 49 23% 48%
26 credit
27 institutions
28 Non- 6 6% 11% 16 15% 34% 22 10% 21%
29 formal
30 credit
31 institutions
32 Total 56 52% 100% 47 44% 100% 103 48% 100%
33
34
Study findings reveal three primary providers of credit to farmers; the formal, semi-formal and non-
35
36
37 formal credit providers, and farmers have choices of where to access credit. Official providers of credit
38
39 comprise the commercial banks (private, and public or government banks, and the NAB). Semi-formal
40
41 credit providers comprise of NGOs, farmers’ social/support groups and cooperatives, the rotating
42
43 savings and credit associations (ROSCAs), the Fadama groups, and faith organizations. And the non-
44
45 formal credit providers to farmers comprise friends, relatives, spouses, merchants, village shopkeepers,
46
47 traders, and other money lenders. The formal credit lenders are primarily made up of the formal
48
49 financial institutions, specifically official banks licensed to operate as such. These credit providers
50
51 operate within formal environments and have structured procedures that borrowers and depositors are
52
53
required to follow to access financial products and services. These laid down systems are regulated and
54
55
56 supervised by the central bank of Nigeria (CBN); financial services and products that these financial
57
58 institutions provide include savings, credit, and insurance, among others. Formal credit providers such
59
60 as banks often offer large sums, and their loan conditions are such that rural farmers often find it difficult
20
39
1
2
3 to meet --this is mainly due to unnecessary administrative procedures that the farmers, especially
4
5
women, find difficulty managing because of their low level of educational attainment.
6
7
8
9 Descriptive analysis reveals that the average years of formal education acquired by women is five years
10
11 compared to nine years for men (see Table 1). Thus, farmers, especially women, are more likely to

12
13 struggle with paperwork and administrative procedures (Fletschner and Kenny, 2011; Fletschener,
14
15 2009; Okojie et al. 2010). According to KIIs, the issues of high interest rates charged by institutional
16
17 lenders especially the commercial banks and the need for borrowers to pledge real collateral as security
18
19 before credit is accessed also results in many rural farmers being excluded from form credit systems as
20
21 smallholders (IFPRI, 2014). The semi-formal credit providers consist of microfinance institutions,
22
23 credit unions, financial NGOs, RoSCAs and farmers’ cooperatives and social/support groups. These
24
25
quasi-financial institutions are licensed to operate with less stringent requirements compared to the
26
27
formal financial institutions. Specifically, the RoSCAs and other support groups provide loans to
28
29
30 farmers who are registered members. These groups obtain funds by pooling resources from the
31
32 registered members over time through savings, which are usually disbursed at a cost (interest rate
33
34 charges), to members in need. Other ways by which social groups provide loans to their members is by
35
36 pooling capital resources from individual members to make deposits in private, public or government
37
38 bank accounts or accounts of faith-based organizations and NGOs, and as groups attract lump sums of
39
40 money which are disbursed to interested members at a price. These groups may also present joint
41
42 collateral to institutional lenders to attract lump sums of loans, which are usually paid to interested
43
44 members, and repayments made at the agreed period with interest charges.
45
46
47
Non-formal credit providers are made up of friends, spouses, relatives, and moneylenders, such as rural
48
49
50 shopkeepers, traders, and merchants. These credit providers play a crucial role in financing the activities
51
52 of farmers. Loans given to farmers by non-formal lenders are usually in forms of cash or production
53
54 inputs (most often drugs, vaccines and other agro-chemicals from shopkeepers) and are preferable
55
56 because of proximity and timeliness of delivery. That notwithstanding, credit from non-formal
57
58 providers are short-term and are most often associated with high costs, especially if borrowed from
59
60 moneylenders or merchants (Badiru, 2010; Okojie et al., 2010).
21
39
1
2
3 Quantitative findings reveal the dominant sources of credit to participating farmers are those accessed
4
5
from semi-formal credit providers (48% access), followed by formal credit providers (31%) and the
6
7
8 least are those obtained from the non-formal credit providers (21%), with more males (52%) than
9
10 females (44%) accessing credit during the production years investigated. Also, 39%, 50% and 11% of
11

12 male participants obtained credit from formal, semi-formal and non-formal credit providers
13
14 respectively, and 21%, 44% and 34% of female participants did that from the formal, semi-formal and
15
16 non-formal credit providers respectively. Except for non-formal credit, fewer women had accessed
17
18 credit from the formal and semi-formal credit providers in comparison to men. This finding is consistent
19
20 with those of Quisumbing and Pandolfelli (2009), Philip et al. (2009) and Saka et al. (2008), who also
21
22 confirm female farmers’ lower access to credit in comparison to men in Sub-Saharan Africa and
23
24
Nigeria. This is attributed to several factors including lack of ownership and control over productive
25
26
assets such as land and equipment to offer as collateral, as well as limited education, mobility, and more
27
28
29 importantly cultural and social barriers (Rossi and Lambrou, 2008; Quisumbing and Pandolfelli, 2009).
30
31 Qualitative findings support this; many farmers acknowledged that semi-formal lenders can be easily
32
33 accessed due to proximity and are prompt in credit delivery; more so, their repayment conditions are
34
35 flexible and could be negotiated and renegotiated. This, as in the empirical literature helps to overcome
36
37 some of the critical barriers to accessing credit by rural people (Okojie et al., 2010; Fletschner and
38
39 Kenny, 2011; Quisumbing and Pandolfelli, 2009).
40
41
42 4.3 Factors influencing participants’ demand for credit
43
44 The logit model has been used to analyse factors generally influencing participants’ demand for credit.
45
46
The application of the logit theory in the context of this study is that given a particular set of factors,
47
48
49 there is a reaction threshold that borrowers must reach before making loan decisions. Thus, at a specific
50
51 value of stimulus below the threshold, the individual will not decide to borrow while at the critical
52
53 threshold value, a reaction is stimulated, and borrowing is observed.
54
55
56
57
58 Table 3 Logistic regression results of farmers’ access to credit
59
60
22
39
1
2
3
Factors Logit model
4
5
6 Coefficients Standard Error
7
8
Age 0.012 0.014
9
Age Square -0.000 0.000
10 Flock Size 0.001 0.002
11 Marital Status -0.019 0.092

12 Collateral -0.036 0.094
13 Primary Education 0.313*** 0.084***
14 Secondary Education 0.491*** 0.084***
15 Tertiary Education 0.626*** 0.101***
16
Deposit 0.107 0.070
17
18 Interest Rate 0.041 0.076
19 Farming Experience -0.001 0.005
20 Extension &Veterinary services 0.11 0.094
21 Group membership 0.119*** 0.069***
22 Income level -0.014 0.085
23 Household size 0.010** 0.005**
24 Information on credit sources 0.047 0.086
25 Gender -0.129 0.069
26 Constant -0.404 0.330
27
***sig. at 1%, **sig.at 5%. *= sig.at 10%
28
29
30 Results on Table 3 reveal farmers’ decision to access credit is significantly influenced by their education
31
32 (primary, secondary and tertiary education all significant at 1% levels), group membership (sig. at 1%)
33
34 and household size (sig.at 5%). For a participant farmer that has attended primary education versus a
35
36 participant with no education, the log of odds of accessing credit increases by 0.313. Similarly, the log
37
38
of odds will increase by 0.491 and 0.626 for those that have attended secondary and tertiary education
39
40
41 respectively; and all are statistically significant at 1% level of significance. Based on the preceding, it
42
43 is expected that acquiring more years of formal education will be positively associated with a decision
44
45 to borrow, access to credit and vice versa. To bolster this, qualitative findings reveal loans from the
46
47 official credit providers are extended to only people who are involved in waged labour and have
48
49 accounts with the banks through which their salaries are deposited. Most often, those involved in waged
50
51 labour would have acquired at least 12 years of formal education and would have had bank accounts
52
53 opened through which their wages are received. It is also expected that obtaining formal education
54
55 would be positively associated with financial literacy required to be efficient with application processes
56
57
and the use of credit. Participants with group membership versus those with no membership change the
58
59
60 log of odds by 0.119 of accessing and this is significant at the 1% level of statistical significance. Higher
23
39
1
2
3 household size influences the probability of credit access positively, for the fact that there would be
4
5
readily available family labour among farmers with higher household sizes for timely execution of
6
7
8 important farm activities, this would reduce costs of production and contribute to higher yields which
9
10 will guarantee loan repayment. Specifically, as expected, it was found that as farmers grow to pass their
11

12 economically active age group due to old age (age squared), they are less likely to access credit, as they
13
14 do not expect to be productive enough to pay back credit borrowed. Also, women who are single are
15
16 less likely to access credit. Qualitative findings revealed that single women have no husbands to stand
17
18 in for them to guarantee access to credit. It is also expected that participants who are single would be
19
20 less likely to borrow as they may not have large household sizes expected to provide the labour
21
22 requirement on their farms. This is very likely as qualitative findings reveal the major source of labour
23
24
in the study area is household labour. When farmers are required to provide collateral to be able to
25
26
access credit, their probability of accessing credit is negatively affected. Farmers and KIs generally
27
28
29 indicated that collateral requirement is mostly a constraint to accessing credit -- some farmers admit
30
31 they do not want to pledge collateral to the banks as they fear to lose them in case of anything going
32
33 wrong. They believe the landed properties they own belong to their immediate and extended families
34
35 and should pass it on from generation to generation, and for that, will not relegate control to lenders for
36
37 whatever reason.
38
39
40 Contrary to the a priori expectations, farming experience failed to lead to increases in access to credit;
41
42 thus, increases in years of farming experience may entail increases in flock sizes, and rural farmers may
43
44 not see the need to borrow to invest on their farms for increased proceeds. Increase in farming
45
46
experience could be used as a proxy for increases in age, which at some point (age square as the study
47
48
49 specifies) would decrease efficiency and influence borrowing negatively. Qualitative findings from
50
51 some male farmers who have failed to borrow reveal borrowing is against their religion as Muslims,
52
53 and others did say they have enough flock numbers and landed properties for their children to inherit
54
55 when they pass on, as such, would not want to lose their dignity by having their debtors harass their
56
57 children after death.
58
59
60 4.4 Exploring factors influencing access to credit from the existing credit providers
24
39
1
2
3 The multinomial logit model (MNLM) has been applied in this context because the research participants
4
5
are faced with more than two alternatives, i.e., if a farmer were to access credit from any of the three
6
7
8 alternatives; formal, semi-formal and non-formal credit institutions, what would be the probability of
9
10 accessing credit from either one given that there are factors influencing such decisions? In each of these
11

12 cases, the observed choice is related to a set of explanatory variables. The MNLM specifically predicts
13
14 and explains the probability that an individual with a certain set of characteristics chooses one of the 3
15
16 alternative credit markets; Y1, Y2, and Y3. Y1 = formal credit institutions, Y2 = semi-formal credit
17
18 institutions, Y3 = non-formal credit institutions, and Y4 = non-access respectively.
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
25
1
2
3 Table 4. Factors influencing access to credit from various credit providers (MNLM)
4 Y1 (Formal credits institutions) Y2 (Semi formal credit institutions) Y3 (Non-formal credit institutions)
5
6 Marginal Effects Marginal Effects Marginal Effects
Agricultural Finance Review

7 Coefficients Standard Coefficients Standard Coefficients Standard Coefficients Standard Coefficients Standard Coefficients SE
8 Error Error Error Error Error
Age 0.113 0.140 0.000 0.011 0.166 0.114 0.011 0.012 0.251 0.200 0.013 0.014
9 Age Square -0.001 0.002 -0.000 0.000 -0.001 0.001 -0.000 0.000 -0.003 0.003 -0.000 0.000
10 Flock Size 0.002 0.020 -0.000 0.001 0.011 0.016 0.000 0.001 0.032 0.018* 0.002 0.001*
11 Marital -2.412 1.337* -0.228 0.111** 0.438 0.740 0.102 0.081 0.608 0.742 0.060 0.050
12 Status
13 Collateral 1.244 0.904 0.118 0.074 -0.026 0.658 -0.019 0.071 -0.864 0.818 -0.075 0.056
14 Primary 1.543 0.901* 0.043 0.073 3.062 0.787*** 0.293 0.081*** 1.085 0.844 0.004 0.058
15 Education
Secondary 2.627 0.862*** 0.110 0.661 3.625 0.831*** 0.306 0.081*** 2.343 0.830*** 0.073 0.053
16
Education
17 Tertiary 3.705 1.007*** 0.192 0.073*** 3.761 0.918*** 0.277 0.086*** 3.186 0.936*** 0.120 0.054**
18 Education
19 Deposit 0.227 0.576 -0.009 0.044 1.716 0.544*** 0.221 0.052*** -1.514 0.732** -0.144 0.047***
20
21 Interest Rate 0.426 0.650 0.038 0.055 -0.206 0.552 -0.042 0.060 0.368 0.679 0.026 0.047
22 Farming -0.080 0.064 -0.007 0.005 0.024 0.035 0.005 0.004 -0.056 0.077 -0.003 0.005
23 Experience
24 Extension & 0.589 1.003 0.023 0.084 0.919 0.796 0.084 0.086 0.346 0.836 0.001 0.057
Veterinary
25 services
26 Group -0.010 0.592 - 0.070 0.442 1.988 0.529*** 0.199 0.048*** 1.647 0.705** 0.081 0.046*
27 membership
28 Income level -0.593 0.710 -0.054 0.058 -0.238 0.575 -0.028 0.062 0.859 0.875 0.072 0.061
29 Household 0.128 0.038*** 0.009 0.003*** 0.070 0.038* 0.005 0.004 -0.009 0.052 -0.003 0.003
30 size
31 Information 1.200 0.521** 0.137 0.043*** -0.886 0.704 -0.116 0.073 0.904 0.968 -0.061 0.066
32 on credit
33 sources
34 Gender -0.237 0.609 0.020 0.048 -0.825 0.531 -0.052 0.055 -1.927 0.729*** -0.121 0.049***
35
36 ***sig. at 1%, **sig.at 5%. *= sig.at 10%
37
38
39
40
41
42 26
43
44
45
46
39
1
2
3
4 4.5 Factors influencing access to credit from formal credit providers
5
6 Results in Table 4 indicate as farmers go beyond their economically productive years (age square), they
7
8 are less likely to access credit from formal credit providers. This conforms to Akudugu et al. (2009a)
9
10
and Akram et al. (2008) who reported the significance of years of age in credit delivery and access.
11

12
13 Contrary to the a priori expectations, flock size was found to be negatively associated with the
14
15 probability of farmer’s access from formal credit providers, this again may be due to increases in
returns
16
17 from their farms due to large flock sizes, thus farmers may not see the need for borrowing; however,
18
19 this is not statistically significant. Marital status of farmers has a negative relationship with access to
20
21 credit from formal lenders, meaning that for a participant that is single versus a participant who is
22
23 married, the log of odds of accessing credit from formal credit providers decreases by 1.337 and it is
24
25 statistically significant at 10% level of significance. The implication in this study is that farmers who
26
27 are married are more likely to access credit from formal credit providers than those who are single.
28
29
Qualitative findings confirm that single women could not access credit because they lacked the support
30
31
32 normally granted by spouses in the application process; -- husbands who have agreed their wives’ access
33
34 to credit would normally act as guarantors and support the application processes for their spouses to
35
36 access credit. The variable of collateral failed to conform to the a priori expectations of having a
37
38 negative influence on access to credit from formal credit providers. This means that having collateral
39
40 influenced the probability of access for farmers who borrowed from formal credit providers; however,
41
42 results indicate that it is not statistically significant. Education at all levels; primary, secondary and
43
44 tertiary education conformed to the a priori expectation of positive influence on the probability of
access
45
46 to credit from formal credit providers. For a participant that has attended primary education versus a
47
48
participant with no education, the log of odds of accessing credit from formal credit providers increases
49
50
by 0.901, and it is statistically significant at 10% level of significance. Similarly, the log of odds will
51
52
53 increase by 0.862 and 1.007 for those that have secondary and tertiary education respectively and are
54
55 both statistically significant at 1% level of significance. Deposits made with formal credit providers
met
56
57 the a priori expectation of a positive relationship with 0.576 probabilities of farmers accessing credit
58
27
39
59 from them. Due to the savings before credit policy by most formal credit institutions, people who saved
60
28
39
1
2
3 with them mostly demanded credit since the principal motive for saving with them is to get credit in
4
5
return. This finding of a positive effect of savings on the probability of demanding credit from the
6
7
8 formal credit providers are confirmed by Akudugu et al. (2009b) and Akram et al. (2008), however, this
9
10 not statistically significant. The perception of high-interest rates did not deter farmers from accessing
11

12 credit from formal credit providers as well. Contrary to what is expected and although not statistically
13
14 significant--as farmers acquire more years of farming experience, they are less likely to access credit
15
16 from formal credit institutions. Farmers’ exposure to extension services is positively associated with
17
18 access to credit from formal credit providers but not statistically significant in determining access from
19
20 these sources in the study area. But for a participant who has access to information on sources of credit
21
22 versus a participant who has none; the log of odds of accessing credit increases by 0.521 and it is
23
24
statistically significant at 5% level of significance. This is expected because those who have
information
25
26
about sources of credit are equipped with the knowledge to make informed choices about where they
27
28
29 access to credit. Group membership did not conform to the a priori expectation of access to credit from
30
31 formal credit providers; however, this is not statistically significant - study findings reveal a majority
32
33 of the farmers’ accessed credit from the support groups they belong to. Contrary to expectation,
farmers’
34
35 perception that those who have high-income access credit from formal credit institutions do not apply
36
37 in this study as they would rather invest from their income than access credit from these sources. As
38
39 expected, increases in household size increases the probability of farmers’ access to credit from formal
40
41 credit providers, due to readily available family labour supply in such households, findings indicate that
42
43 the log of odds of accessing credit from formal credit providers by farmers who have large household
44
45
sizes increases by 0.038, this is statistically significant at 1% level of significance. The gender of
46
47
48 participants also conforms to the a priori expectations and confirmed by study findings. This implies
49
50 that rural female farmers are less likely than their male counterparts to access credit from formal credit
51
52 providers, this is, however, not statistically significant. This finding is consistent with Quisumbing and
53
54 Pandolfelli, 2009; Fletschner and Kelly (2011).
55
56
57
58
59
29
39
60
30
39
1
2
3 4.6 Factors influencing access to credit from semi-formal credit providers
4
5
Factors which have significantly determined farmers’ access to credit from semi-formal institutions are
6
7
8 education at all levels, deposit, group membership, and household size (see Table 5.3). This indicates
9
10 that for a participant that has attended primary education versus a participant with no education the log
11

12 of odds of accessing credit from semi-formal credit institutions increases by 0.787. Similarly, the log
13
14 of odds will increase by 0.831 and 0.918 for those that have attended secondary and tertiary education
15
16 respectively and are all statistically significant at 1% level of significance. Likewise, the log of odds of
17
18 accessing credit from semi-formal credit sources for participants who have deposits and group
19
20 membership versus the ones who have not increased by 0.544 and 0.529 respectively, and all are
21
22 statistically significant at 1% level of significance. For participants who have no group membership,
23
24
the log of odds of accessing credit decreases by 0.062, and this is statistically significant at 1% level.
25
26
The study investigated 72 male and female farmers each who have a membership of cooperatives or
27
28
29 social grouping (see Table 1). Members of such groups’ pool financial and human capital required for
30
31 running the association, with the aim of providing affordable services to members. Both quantitative
32
33 and qualitative findings also suggest that the major sources of credit to men and women are those
34
35 accessed from semi-formal credit providers; most often the social groups, cooperatives, and rotating
36
37 credit associations and NGO’s in which farmers have a membership. This finding has also been
38
39 confirmed by as Samson and Obademi (2018) in Nigeria and Akudugu (2010, 2011) in Ghana.
40
41 Deposits/savings made with semi-formal credit institutions by farmers met the a priori expectation of a
42
43 positive relationship with the probability of farmers accessing credit from them. Akudugu et al. (2009b)
44
45
and Akram et al. (2008) acknowledged that savings form a basic requirement of accessing credit from
46
47
48 semi-formal credit institutions, besides, this is the dominant sources of credit to participants and
49
50 qualitative findings reveal deposit is the major requirement for access. As expected, the log of odds of
51
52 participants with large household sizes accessing credit from semi-formal credit institutions increases
53
54 by 0.038, and it is statistically significant at 10% level. Again, this might be due to readily available
55
56 family labour supply in such households. Although not statistically significant in determining the
57
58 probability of access to credit from semi-formal credit sources, farmers access to information on
sources
59
60 of credit and their gender influenced their access to these sources positively.
31
39
1
2
3 4.7 Factors influencing access to credit from non-formal credit providers
4
5
Factors that have a significant positive influence on participant’s probability of accessing credit from
6
7
8 non-formal credit providers were flock size, education at the secondary and tertiary levels and group
9
10 membership (see Table 4). The log of odds of accessing credit from non-formal credit institutions for
11

12 participants with large flock sizes versus the ones with small flock sizes would increase by 0.018, and
13
14 this is significant at the 10% level of significance. The ability to have large flock sizes gives the
15
16 confidence to borrow from these sources because of the ability to repay credit and sometimes in kind
17
18 with livestock as it is normally the case in the study area (KIIs and FGDs). Findings reveal the log of
19
20 odds of borrowing increases by 0.830 for farmers who have more than six years of education and up to
21
22 0.936 for farmers who have attained tertiary education, and these are both statistically significant at 1%
23
24
level of significance. As expected, group membership positively influenced the probability of farmers’
25
26
access to credit from these sources and the log of odds increases by 0.705 for farmers who have group
27
28
29 membership. Farmers express the views that group membership means that one has the social capital
30
31 and recognition in the village and therefore could easily access credit from money lenders. FGD
32
33 participants and KIs emphasized the point that borrowing from non-formal credit providers is very much
34
35 dependent on relationships and social networks, hence the link with group membership. Factors that
36
37 have significantly affected access negatively were deposits and gender. Findings indicate that where
38
39 farmers have savings somewhere, they are less likely to access credit from these providers. Both
40
41 quantitative and qualitative findings reveal - women are more likely to demand credit from non-formal
42
43 credit markets than men.
44
45
46
Overall, the MNLM results gave an adjusted R2 of 0.32, which means that all the independent variables
47
48
49 included in the model could explain about 32% of the variations in probability of farmers accessing
50
51 credit from these sources. The log likelihood ratio (LR) statistic was found to be significant at 1%, and
52
53 this means that all the factors included in the MNLM estimation jointly influence the probability of
54
55 farmers’ accessing credit from these sources.
56
57
58 5.0 Conclusion and policy recommendation
59
60
32
39
1
2
3 The study used the multistage sampling technique to select 216 participants; 108 each of male and
4
5
females from 18 villages across the state based on the information obtained from the state ministries of
6
7
8 agriculture and cooperatives. The research adopted the pragmatists’ paradigm to its inquiry employing
9
10 individual interviews through questionnaire administration, FGDs, and KIIs. A total of 12 FGDs were
11

12 also held with farmers across the sampled villages. Also, 10 KIs from selected credit providers across
13
14 the study area were interviewed. The research used several research techniques, procedures, and
15
16 strategies based on the mixed methods paradigm, and employed analytical techniques at different social
17
18 strata to achieve its objectives. As such, the study used a robust approach regarding methodology to
19
20 ensure that valid and reliable results are obtained.
21
22
23 The study identified three primary sources of credit to participating small ruminant farmers; the
formal,
24
25
semi-formal and non-formal credit sources. The semi-formal credit lenders are the dominant sources of
26
27
credit to participants with about 48% accessing credit from them. It was found that only 31% and 21%
28
29
30 of participants obtained credit from formal and non-formal credit providers respectively. Further
31
32 analysis by gender reveals more male than female participants accessed credit during the production
33
34 years involved, however, more men than females accessed credit from formal and semi-formal credit
35
36 providers, while more women accessed credit from the non-formal credit providers. Based on these
37
38 findings, it is concluded that there is a low level of access to credit from the identified sources by farmers
39
40 and women are more at a disadvantage in accessing credit services, especially from the formal credit
41
42 providers.
43
44
45 Among the factors investigated which influence participants access to credit generally, the logit findings
46
47
reveal that education, group membership and household size among others were positively and
48
49
50 significantly associated with participants’ probability to obtain credit. Among factors found to be
51
52 significantly associated with access to credit from the formal credit lenders, the MNLM findings reveal
53
54 significant factors to be education, information on credit sources, deposits, household size, and marital
55
56 status.
57
58
59
60
33
39
1
2
3 For those who accessed credit from semi-formal credit providers; education, deposit, group
4
5
membership, and household size were factors that significantly influenced their access. Factors that
6
7
8 have a significant positive influence on participant’s access to credit from non-formal credit institutions
9
10 were flock size, education, deposits, group membership and gender As such, policies aiming to
improve
11
12
13
14
credit access among farmers in the study area must target these principal factors. Firstly, it would be
helpful to encourage and support the creation of farmers groups and encourage their participation
15
16 through good leadership to create a conducive environment for learning. These groups could involve
17
18 experts to provide relevant training and the support required from the various institutions providing
19
20 services. These could be in the form of training to acquire new skills and knowledge on improved
21
22 farming methods, financial literacy; and information on financial products and services, in accessing
23
24
markets for inputs/outputs and services. Also, social network through group membership act as a
25
26
conduit for useful information sharing which is critical in mediating the relationship between an
27
28
29 institutional framework and financial inclusion (George et al., 2018). More so, group membership
30
31 enables members to derive the benefits associated with social collateral. In developing information
32
33 content and advertising materials, effort should be taken to simplify information appropriate to farmers
34
35 reading and numeracy skills. To improve education, more efforts could be made to develop and
improve
36
37 rural farmers’ enrolment into formal/informal education. These could be in things like developing road
38
39 infrastructure linking rural areas to the urban cities where schools are located and providing reasonably
40
41 priced transportation, and in locating schools closer. It could also be useful to revise formal financial
42
43 sector regulations to encourage outreach to rural areas with financial products that are safe and easy to
44
45
understand. This could be done by locating finance institutions in proximal distances and placing
46
47
48 emphasis on the mobilization of savings and deposits by offering a variety of savings opportunities that
49
50 consider the differences in farmers’ needs and constraints, ensuring that the poor among them can
afford
51
52 the minimum deposits. These institutions could consider the acceptance of both physical and social
53
54 collateral. Besides, these institutions could conduct market research to have a broad understanding of
55
56 the financial needs, and preferred products by rural farmers to develop financial services tailored to
57
58 their needs. Because more rural farmers and females accessed credit from informal credit providers,
34
39
59
60 consideration could be given to the provision of funding to informal lenders in rural communities for
35
39
1
2
3 onward lending to community members. This will help to consolidate their strengths and mitigate their
4
5
weaknesses. This is particularly important because most informal lenders are very experienced lenders
6
7
8 with first-hand knowledge of their local clientele. However, they are very resource constrained and are
9
10 therefore not able to lend to many borrowers. This could be achieved through the concept of credit
11

12 layering in which formal lenders delegate loan provisions to downstream lenders who have better
13
14 information on borrowers that generate high repayment rates (Rong et al., 2014). By this concept,
15
16 informal lenders could be encouraged through the appropriate policy framework to act as community-
17
18 level agents serving as intermediaries between borrowers in farming communities and the formal
19
20 financial institutions based in the cities and towns across the country. This will help to minimize issues
21
22 raised by proximity, simplify application and repayment procedures and processes, enhance timely
23
24
credit delivery and reduce transaction costs. Overall, this framework will help in the delivery of
25
26
affordable and convenient financial services to both lenders and borrowers. Also, it would be useful to
27
28
29 design loan packages that would encourage rural farmers to engage in more profitable economic
30
31 activities by bundling credit with additional support services like monitoring the progress of their
32
33 productive activities and connecting them with agencies or groups that would support their productive
34
35 activities.
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
36
39
1
2
3
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Journal: Agricultural Finance Review

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Rural farmers, credit demand,, credit access, logit model, multinomial

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