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AGRICULTURAL CREDIT CO-OPERATIVES AS VAIBLE

SUPPLEMENTS FOR FINANCING SMALL SCALE

FARMING IN NIGERIA

(A CASE STUDY OF SELECTED AFRICULTURAL CREDIT

CO-OPERATIVES IN UMUDIKE, IKWUANO L.G.A)

ABSTRACT

Financing is an important area in any business today.

In agriculture, it is also important in most of its business has

been financed in one way or the other through retains,

banks, governments, financial institution and so on. The

small-scale farmers are mostly handicapped in the art of

obtaining finance for the production. At times, they are

really putting in their effort but end receiving lesser result

because of lack of finance. From the findings, these small-

scale farmers need a finance institution credit organization

that can be able to operate at their level. It can be said that

agricultural credit co-operatives is viable supplement to

finance small-scale farmers due to the nature of their

operations.

i



TABLE OF CONTENTS

Title page--------------------------------------------- i

Certification------------------------------------------ ii

Dedication-------------------------------------------- iii

Acknowledgement----------------------------------- iv

Abstract---------------------------------------------- vi

Table of contents------------------------------------ vii

CHAPTER ONE

1.0 Introduction----------------------------------- 1

1.1 Background of the study--------------------- 1

1.2 Statement of the problem-------------------- 2

1.3 Objectives of the study---------------------- 3

1.4 Scope of the study-------------------------- 4

1.5 Research Questions-------------------------- 4

1.6 Significance of the study--------------------- 6

1.7 Limitations of the study---------------------- 6

1.8 Definition of terms--------------------------- 7

ii



CHAPTER TWO

2.0 Literature Review----------------------------------- 9

2.1 The nature of Agricultural credit co-operatives---- 10

2.2 Agricultural Credit---------------------------------- 11

2.3 The nature of small – scale farming-------------- 14

2.4 Role of credit in Agricultural development------- 17

2.5 Problems of small-scale farmers in

Agricultural finance------------------------------- 23

2.6 Role of co-operative in financing Agricultural

Farming in Nigeria------------------------------- 27

Reference---------------------------------------- 32

CHAPTER THREE

3.0 Research methodology-------------------------- 33

3.1 Research Design--------------------------------- 34

3.2 Sampling Design-------------------------------- 35

3.3 Method of data Collection--------------------- 35

3.4 Method of data Analysis------------------------ 36

iii



CHAPTER FOUR

4.0 Presentation and Analysis of data--------------- 38

4.1 Presentation of data----------------------------- 38

4.2 Analysis of Data--------------------------------- 41

4.3 Decision or Interpretation---------------------- 44

CHAPTER FIVE

5.0 Summary, Conclusion, Recommendations------- 48

5.1 Summary------------------------------------------ 48

5.2 Conclusion----------------------------------------- 51

5.3 Recommendation--------------------------------- 53

Bibliography------------------------------------- 67

Appendix----------------------------------------- 60

Questionnaire----------------------------------- 62

iv



v



CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Agriculture is an art and a way of life, it yet remains a

business and like any other business cannot be carried on

much less expanded without adequate funding. In Nigeria

Agriculture, it had a prime place in the past economy but oil

industries. Infact agriculture was until the 70’s the principal

foreign exchange earner in the country. For instance in 1962

it accounted for 82% of the total export value of the country

but by 1983, it has fallen to two time of 3.62% and as at

1985 total non-oil export accounted for only 5.2% of the

country total export, so one can imagine what share would

be. This poor performance of the agriculture sector can be

attributed to general neglect and funding of the sector.

Therefore, there has been a great concern on the

inability of the agriculture sector in Nigeria to adequately

fulfill its expected roles which include ensuring food security

for a rising population, providing raw materials for the

1



industrial sector, generating employment and at the micro-

macro levels, earning foreign exchange and contributing to a

healthy balance of trade. Subsistence oriented small holders

dominate Nigeria agriculture. This account for the low level

of investment.

The basic agricultural finance problem is poverty

among peasant smallholder. Agricultural credit is extended

to farmers to cover expansion before crops and livestock are

ready for sale and to cover crop storage. So agricultural

credit co-operative will be available supplement for financing

small-scale farming in Nigeria.

1.2 STATEMENT OF THE PROBLEM

Financing is the art of rising and using of funds by

individuals co-operatives and governmental organizations for

the day to day operations, running and management of a

business undertaking.

The above definition, financing of agriculture generally

has been and is still a serious problem in Nigeria, financing

2



of large and medium scale farming have been improved but

financing of small scale farming so far have defiled all effort,

with the reform that various attempt made by state and

federal government have yielded little or no result.

This research project looked at agricultural credit co-

operatives as viable means of financing small scale farming

since all the conventional means seems to have failed. The

research involves studying these agricultural credit co-

operatives of financing small scale Agriculture in Nigeria.

1.3 OBJECTIVES OF THE STUDY

This research project is intended to accomplish the

main objectives which are to determine how agriculture

credit co-operatives can act as viable supplements for

financing small scale farming. Other objectives include:-

a) Determine the sources of finance available to

agricultural credit co-operatives.

b) Determine the level of access of farmers to credit

from their agricultural credit co-operatives

3



c) Determine the potential of agriculture credit co-

operatives to help in finance, management and

members.

1.4 SCOPE OF THE STUDY

The researcher found the impossibility of covering

many small-scale farming in Nigeria, so she focuses her

investigation in selected Agriculture credit co-operatives in

Umudike Ikwuano L.G.A in Imo state. The research which is

based on finding a solution to the problem of financing a

small-scale farming in Nigeria by agricultural credit co-

operatives.

1.5 RESAERCH QUESTIONS

In carrying out this research work, the researcher

asked the following questions in the agricultural credit co-

operatives in Umudike Ikwuano L.G.A.

4



1. Could there be any solution for financing based on the

agricultural credit co-operatives scheme?

2. Will financing by the agricultural credit co-operatives

provide small scale farmers with growth, expansion and

development?

3. Is contribution of co-operative organization in financing

agriculture in Nigeria especially small scale farming

feasible?

5



1.6 SIGNIFICANCE OF THE STUDY

The importance of agriculture to the economy and need

of Nigeria can never be over emphasized. It is agriculture

that provides the need of the country and it is the small

scale farmer that do realization of this goal of supplying food

from the agricultural sector. The benefit you are to derive

form this study will be if small-scale are finance, there will

be enough food at affordable prices to the people. It is then

quite significant to study why all the available means of

financing the small scale farmer have not worked and to

look for a new way of financing it so that it would contribute

its quote effectively to the economic development of the

nation.

1.7 LIMITATIONS OF THE STUDY

This research has not been easy at all. There are lots of

factors inherent in the research situation that affects the

results.

These factors include:-

6



Time Constraint: This is because the research project has

to be completed within three months and so the researcher

has to combine the lecture and the research work which has

to make it longer as never expected.

Shortage of finance: This is another big obstacle, which

has to involve the money used in going to various places,

then the money for typing and binding it not excluded. But

all these not withstanding, all best applied to see that

research work was successful.

1.8 DEFINITION OF TERMS

APMEU: Agricultural Project monitoring and

evaluation unit.

ACDI: Agricultural Co-Operative Development

International.

ACGS: Agricultural Credit Guarantee Scheme

ACGSF: Agricultural Credit Guarantee Scheme Fund.

CCMS: Co-Operative Credit and Marketing Societies.

CPMS: Co-Operative Produce Marketing Societies.

7



FACU: Federal Agricultural Co-Ordinating Unit.

FEAP: Family Economic Advancement Programme

FMCS: Farmers Multi-Purpose Co-Operative

Societies

GFS: Group Farming Societies

NACB: Nigeria Agricultural and Co-Operative Bank

NALDA: National Agricultural Land Development

Authority

NACRDB: National Agricultural Co-Operative And Rural

Development Bank

8



CHAPTER TWO

2.0 LITERATURE REVIEW

Finance is the lifeblood of any business organization, be

it in agricultural, manufacturing, commerce or services

sector. In fact business or organizations cannot perform very

well without adequate funding. This unique role of finance

makes it to be very important. In all human endeavors it

needs adequate funding for its goal to be achieved.

In this literature, the author looked under these

subheadings:-

1. Importance of agriculture

2. Role of credit in agricultural development

3. Sources of credit to farmers

4. Roles of financial institutions in agricultural

finance in Nigeria.

9



2.1 THE NATURE OF AGRICULTURAL CREDIT CO-

OPERATIVES

There has been a great concern on the inability of the

agricultural sector in Nigeria to adequately fulfill its expected

role which includes ensuring food security for a rising

population, providing raw materials for the industrial sector,

generating employment and income at the micro-macro

levels, earning foreign exchange and contributing to a

healthy balance of trade.

Nigerian government in the past enacted different but

related programms like the accelerated food production

programmed (1972). Operation Feed the Nation ( OFN)

1976 and the Green Revolution, (1979) there was also such

programmed, such as the Better Life programmed aimed at

using rural women to boast agriculture, and their family

support programme.

Almost all the programme incorporated the provision of

credit to agriculture. Others such as the rural banking

scheme, agricultural credit guarantee scheme fund (ACGSF).

10



Concessionary interest rates as well as the establishment of

the Nigeria Agricultural co-operative and rural development

bank (NACRDB) were expected to boast rural and

agricultural credit supply.

The basic agriculture finance problem is poverty among

peasant small holders. Even if farmers have the inclination

to increase their level of production, poverty entrap them at

a low equilibrium level with factors and inputs beyond their

purchasing power, while they are compelled to sell in times

of surplus but low prices to meet urgent family needs or due

to the lack of storage, transport and processing facilities.

2.2 AGRICULTURAL CREDIT

Credit is obtaining resources with a promise to pay in

the future. It is granted in exchange for goods, services,

money or another department given in the present. Credit

therefore supplement money in the economy makes possible

the sale of goods and services with immediate payment by

the buyer. Time factor is another essential part of every

11



credit transaction. Credit must be based on the borrowers

character, capital, collateral capacity and condition.

Agricultural credit is extended to farmers to cover

expenses before crops and livestock’s are ready for sale and

to cover crop storage.

TYPES OF AGRICULTURAL CREDIT

There are two types of agricultural credit distinguished

on the basic of source. It includes formal and informal

credit.

Formal Credit: Formal sources of credit are institutionalized

and within the control of government monetary authorities

and policies, Examples are banks and government agencies.

The liberalization of the financial market under the SAP since

1986 meant that most of the compulsion on banks to lend to

agricultural

(Or any other sector) was abolished (Nwajiuba 2000). The

agricultural credit guarantee scheme is still however exists.

12



Liberalized financial market include deregulation of interest

rate by which market forces determine the cost of credit

central bank institute this scheme.

Informal Credit: These are non-institutional credit. The

sources of informal credit includes: money lenders, Esusu

and other credit clubs. The strength and resilience of

informal credit lies in the lack of bureaucracy, timelines,

flexibility, in credit conditions and a general personal inform

touch. Defaults rate is low due to the social sanction. Driving

form the bounds between lenders and borrowers. Real

interest rate may however be higher than formal credit.

Unconditional security may be accepted.

13



2.3 THE NATURE OF SMALL –SCALE FARMING

Small-scale farming may be defined as an enterprise

employing between 5 and one hundred (100) farmers with

an annual turnover of about 400,000.00 small scale farming

employs many Nigerian particularly those dwelling in the

rural areas. This considered to be involved in small scale

farming business includes those who farm for commercial

purpose and not necessary, those engage in subsistence

farming. Farming in Nigeria technology is not advancing.

This is as a result of lack of adequate farm land, poor

preservation of harvested crops and fertilizers and seeds.

Though farming is lucrative, but the risk associated

with it in Nigeria is as a result of inadequate support from

government. The activity of government agencies created to

reform the sector has always left much to desire. For now, it

is one of the unattractive sectors to private sectors

investment.

Lack of capital: Most agricultural co-operative farmers

require a large amount of capital to establish and to operate

14



the business. In agricultural production. Co-operative

require some things to boast their production and some of

the requirements includes access to tractor either by

purchasing or hiring, seeds/seedlings, fertilizers and other

chemicals. There is therefore no doubt that substantial

capital is require to organize such agricultural co-operative

management of the farm which range from cultivating,

planting, harvesting, storage and marketing.

Although various source of finance are available co-

operative society both internal and external, but these

sources are grossly inadequate. The financial institutions

have not given any assistance to agricultural co-operative or

small-scale farmers because they have little confidence in

the societies.

Lack of patronage: Patronage is very important.

Component to successful small scale farmers more especially

in agricultural co-operatives to the societies. Patronage is

not only in the financial aspect, agricultural co-operative

societies and small-scale farmers need enough time to be

15



devoted to the farm right from the preparation stage to the

harvesting period.

Inadequate marketing outlet: Many agricultural farmers

who produce huge amount of product suffer from poor

marketing. Inadequate marketing outlets results from poor

infrastructural facilities, like roads, water, wages, substantial

agricultural output by these societies cause more problems

for the organization. These intend to discourage members in

subsequent season.

Attitudes of Banks towards Small-scale Farming: Banks

on their own part have argued that they are discourage to

lend to this small-scale farming draw up feasibility reports

that are viable and they do not maintain adequate financial

records about their business. The small scale can obtain loan

form the bank on their own merit except the state

government stands as guarantors. This bank attitude is

partially as a result of careless manner in which some

farmers handle bank loan. In the past where in most cases

16



government are made to repay such loans which they are

guarantor.

2.4 ROLE OF CREDIT IN AGRICULTURAL DEVEOPMENT

Though agriculture is an art and a way of life, it yet

remain a business and like any other business cannot

operate unless funds are available for maintenance,

replacement of its capital equipment and other expenses.

Most authors on this issue are unisonous on the need

for adequate funds.

Authors believe that finance is the life blood of other

business so also it is for agriculture, it must be noted that

credit as one of the input of agriculture is very important

though other factors like labour, land and entrepreneur are

also important. It is credit that it is been used in buying

them so funding is a basic necessity of agricultural

development.

17



According to Soyingbo, agricultural credit can be

powerful especially if supplied in sufficient quantity and used

efficiently.

TYPES AND FORMS OF CREDIT

1. Short-Term Credit: This is the one which finance

the current year’s crop operation, seeds, fertilizers

and farm expenses until the crops is sold. This may

not be large

2. Medium-Term Credit: This is the one that is longer

than one year but than three years. It is required for

the acquisition of breeding stock with a short life.

3. Long Term Credit: This is necessary to acquire

major machines, carryout major improvement of

farmland and buildings.

SOURCES OF CREDIT

There are two main sources of credit to farmers via

internal and external sources.

18



Internal sources: consist mainly of net cash flow operation

in other words it is the profit generated by the farmers form

the farm which is saved for future investment. In most cases

this source of credit is very limited as farmers. In the

country had in the past hardly make enough profit to sustain

them very well not to talk of savings for future investment.

This source however have in the past been the major

source of credit to farmers but it is fast changing as farmers

move external credit to expand their production with their

aim of making much profit.

External source: This includes net flow of loan funds, net

sale of real estate and the modern times equity introduced

by new properties. These external sources of credit can be

divided into two major areas which include:

1. Non- institutional source

2. Institutional source

Non-Institutional source is the major source of external

credit in the past. It includes credit from relatives,

merchants, and friends and money lenders.

19



Here before loans are out there must exist between the

lenders and the borrower. Some elements of familiarity,

confidence and trust. In some part of this source interest are

not normally changed. Non-institutional has various

limitations because of lack of trust between friends and

relatives.

Institutional Source can be divided into two which include

domestic and foreign sources. Domestic source includes the

earliest loan from traditional thrift and savings. Institutions

like Esusu or Isusu though some of them still exist while the

modern financial institutions includes commercial banks, co-

operative banks, agricultural credit guarantee scheme, the

Nigeria agricultural and co-operative banks, co-operative

financing institutions and other financing institution. Most of

these financial institutions are however not been granting

loans to farmers because the risk involve in agriculture and

cost of financing the loan scheme to cover all the scattered

small-scale farmers in the country.

20



According to Wrights J.A principal agricultural manager.

IBWA LTD “Hour opinion, there is no excuse for commercial

bank risking depositors money or what is an excellent farm

producing first class can be put in the stores and represent

some sort of tangible assets. Generally speaking,

agricultural product is highly perishable and consequently

the approach to agricultural financing is quite different. Also

laying his quite support to the merchant and commercial in

their attitude towards agricultural financing.

According to Ibru M.O.C chairman and chief

executive of Ibru organization Lagos, Nigeria. Financing of

small scale farming is very expensive and many be

impossible to cover the ratio. Also one should sympathize

with the banks because of low grants of such loans to

farmers who are widely literate and lack understanding of

how to get loans. He continued government should rather

create a special financing assistance programmed that could

recognize and neutralize their peculiar problem

21



Ashamu E. traced the problem of farmers getting loan

on assistance of collateral. He went on to say that even the

ACGS fund could not help unless the government should

increase the guarantee to 100%, otherwise he

recommended that thought banks are supported to be than

main suppliers of credit to farmers, this is limited and in

most cases, don’t even get to trust farmers. Foreign

institution source came mainly from world and its agencies

life F.AA ands IDA. The first agricultural loan to Nigeria from

World Bank in 1971 and the amount involve was $72million

for cola rehabilitation in the western Nigeria. As at 1983

total World Bank agricultural loan to Nigeria shows at

$763m, this is substantial and can be said to be one of the

major source of credit to farmers but how far can the credit

get to farmers is another matter.

According to Soyingboi of ICON Merchant ltd, It is the

relevant of regarded as non-chalance on the part of

merchant banks, but could be born out of absence of an

effective organization and or institutional structure for loan

22



administration, agricultural project appraisal and bank of

sophistication on the part of small farmers to keep adequate

records and financial statement.

2.5 PROBLEMS OF SMALL-SCALE FARMERS IN

AGRICULTURAL FINANCE

In Nigeria most of these small-scale farmers live in the

rural areas and they produce up to 80% of total agricultural

output of the country. These small scale farmers who

predominate in Nigeria agriculture, according to Okoronuem

are characterized by the following illiteracy, ignorance, little

capital, small size farm, lack of tangible assets, low

productivity, low income, little or no savings and

constraining rural environment.

According to Okoronuem, this characteristic conspire to

make this services or formal source of finance inaccessible

to the small-scale farmers. The consequence is that the

small-scale farmers. The expose to informal source at

exorbitant cost. Illiteracy and ignorance make it impossible

23



for the small-scale farmers to understand loan application

forms or how to complete them. They find it difficult to make

relevant inquiries without relying on third parties of doubtful

influences.

These farmers find it difficult to approach banks and

other financial institutions. Small-scale farmers in

approaching financial institution because their needs for

fixed and working capital are small and can be provided at

high cost by financial institutions. By implacable, merchants

and large-scale farmers generally have access to financial

institutions but those categories of farmers are the minority

in the Nigeria agricultural settings.

Other problem that affects all farmers relates to delay

in reaching and implementing decisions on loan application

by banks, inadequacy of loan. Such loans since they are not

granted at the specific time the funds are needed for

clearing, planting and harvesting as the case may be.

Lack of capital would mean that the small-scale

farmers’ productivity is corresponding lower productivity

24



translates into low repayment capacity that will lead to high

default rate in loan administration. Low capital combined

with small-size of farm holding reduces potentials of profit

for further investment inspector. If sizes are elastic to

increase productivity through factors complimenting but

form size do not always respond to increased finance, since

traditional land tenure system reduces the size of farm

holdings.

Lack of clear title to land increases the risk of advances

to farmers, where title to land increase serves as collateral

security where land market operates and marketable value.

Since farmers lack tangible security title deed,

substitutes and increase advance to agricultural sector. Low

level of productivity and hence low income also militate

against farmers in raising agricultural finance. Low

productivity is a function of paucity of the co-operative

factor in production. These results are reduced. Output and

income, since the income need of farmers are generalized.

In consequences the small farm met a vicious cycle of

25



poverty, low capital and the cycle is complete. The small –

scale farmer is weighed down by these constraints which will

tend to keep him permanently poor unless government

intervenes and introduces a big way to punish him with a big

push out of their constraining vicious cycle of poverty.

Furthermore, the rural environment does not have the

amenities that can help to induce productivity. Example

water, electricity ad good roads. So the constraining vicious

cycle tends to persist.

A high default in agriculture tends to inhabit further

advances in this sector. However to solve this problem

weighing against small-scale farmers getting finance.

Don Ike in his article titled ‘finance agricultural

development in Nigeria introduced the following suggestions.

Credit institution should be encouraged to give more

assistance to agriculture, adopting hire purchase in

purchasing some items where loans or other uses.

Encouraging banking habit among the rural farmers so that

the bank mop up excess liquidity and grant it to the needed

26



farmers. Opening more rural bank branches so that farmers

should have access to these banks, education and public

enlightenment should be set to wipe out illiteracy and

ignorance amongst the farmers, so that they can at ;least

differentiate between agricultural loan and a granted project

that such project has been carefully selected and has

potential of repaying the loan.

In the course of implementing of the projects it should

be properly supervised and evaluated and also appraised

form time to time to ensure compliance. Also before

approval of the loan, care must be taken to ensure that is

efficient management to manager the loan efficiently.

2.6 ROLE OF CO-OPERATIVE IN FINANCING

AGRICULTURAL FARMING IN NIGERIA

Contribution of c-operative organization in financing

agriculture in Nigeria especially small-scale faming has been

very important and cannot be overlooked. As earlier stated

no business can survive without adequate flow of finance.

27



The co-operative help in several ways in financing

agricultural farming in Nigeria. Co-operative organization

helps through their banks lending to agricultural farmers in

Nigeria. The co-operative banks gives loans to agricultural

farmers with little or no interest charged.

Co-operative financing of agricultural dates. Back to the

early dates of quasi-co-operative like the Esusu clubs, later

come to the modern co-operatives which started first in the

western.

Nigeria in the 1930’s it can then concentrated in

financing of cocoa farming, processing and marketing for its

members. The societies then succeeded inside trucking the

activities of the profit of their sweat. It was hitherto about

1935 that the government started to recognize the

importance of co-operative, this leading to the recognition of

co-operatives.

Among the earliest co-operative society to be

established in the country was the ogba coca co-operative

society. This co-operative society engages in marketing. The

28



1950’s and 1960’s saw the establishment of state apexes of

this co-operative organization. It also brings the government

involvements in co-operative organizations. This leads to

formation of such co-operative societies like eastern Nigeria

cooperative palm produce exporters limited, association of

thrift and loan co-operative of eastern Nigeria limited,

association of farmers co-operative, association of farmers

co-operative societies of eastern Nigeria

The 1970’s witnessed the registration of many multi-

purpose farmers’ co-operative societies. As at present, at

least one of such farmer’s multi-purpose farmers co-

operative societies (FMCS) can be in every community in

former eastern Nigeria and they engage mainly in

agricultural financing which is the main occupation of

members. Infact these FMCS have been found to be

channeling funds to those small-scale farming to emphasize

the role of c-operative in financing agriculture in Nigeria.

Odugbanjo Kola, chief inspector of co-operative bank

limited Ibadan said “there is no gain saying the fact that the

29



hope of the co-operative movement is seen as a means of

general economics development in agricultural productivity.

It can be increased through the co-operative societies. This

therefore is an opportune time to drive the point home to

us. That there is no organization today in Nigeria that has as

many facilities as co-operative movement to operate at the

village level for equitable distribution of government

amenities particularly as regards the achievement plans. He

continued experience has shown that agricultural ventures

undertaken by individual have continuously been

unprofitable and discouraged.

The answer to agricultural development is co-operative

by this, it does not mean co-operative among peasant

farmers only but a coming together of our seasonal

agriculturist as co-operative societies in Nigeria. Professional

and businessmen have realized the need that joint efforts

with a view to meet competition. The farmers are yet to

realize the importance of co-operative effort. There is also a

conspicuous absence of local representatives from the

30



board. The envisaged institution for implementing

agricultural credit to small farmers would be in the form of

multipurpose co-operative societies as opposed to exciting

single purpose agricultural credit co-operatives.

From the foregoing, one can see that the contribution

of co-operative has been on the increase and mostly small-

scale farmers in the rural areas have felt its effect.

31



REFERENCES

OKWONKWO, M (2005): Agricultural Co-operative

Extension. Publisher in Nigeria. By

dab2s Enterprises Hi kagha st Owerri

imo state.

WRIGHT J. A (1981): Problems of Agricultural Financing.

Bullion Delhi Vards publications Ltd

U.S.A.

IKE D. O (2003): Rural Banking Programme in Nigeria.

Lagos king and George printing press

Ltd.

Ike D. O (2001): Appraisal of agricultural credit guarantee

scheme fund in Nigeria; Nigerian journal

of financial management.

32



CHAPTER THREE

3.0 RESEARCH METHODOLOGY

Research methodology as the name implies means the

way the work was carried out. It presents in sequential

order how the investigation was done or executed.

Broadly defined research as the process of finding out

or searching for the solution to a problem. According, a

problem in research is any question that needs to be solved.

In research methodology of this study, the central problem

is to find out how agricultural credit co-operatives will act as

viable supplements for financing small-scale farming in

Nigeria.

In view of this research have adopted some special

statement method aimed at arriving at a purposeful research

finding while elate to the unique nature of the subject

matter. It also used survey approach which is a type of

discipline research in which data are typically collected

through questionnaire, interview and observation. It is

33



popularly used to asses the ideas or opinion towards

individual events, organization.

3.1 RESEARCH DESIGN

With the research problems stated and the hypothesis

formulated, the research had to design the method of data

collection which involves primary and secondary Data were

in form of oral interview and questionnaire administered to

the staff of the financial institutions like ACGSF, NACRDB

and commercial banks while the secondary data were

gathered from articles journals and books, published and

unpunished. The researcher also collected data from

seminars and symposiums in the state library, Enugu state

university of science and technology library, institution of

management and technology library, university of Nigeria

Enugu campus library were also visited to source relevant

facts.

34



3.2 SAMLPING DESDIGN

Sampling design is the process of not undertaken

complete enumeration due to limitation in resources. The

option is to limit our study to some of the objects selected

from some states in Nigeria with a view to extending our

findings to entire population.

The aim of sampling is that of making influence about

the whole in sampling design of this study, that his research

Umudike Ikwuano L.G.A IN Abia state was taken for

sampling design in essence of small-scale farming while was

been used by agricultural credit co-operatives as viable

supplements for financing them. The reason is based on a

carefully guideline at cost that is affordable.

3.3 METHOD OF DATA COLLECTION

In selecting this research, the information was collected

from the research administered, questionnaires was

administered on the members of the agricultural credit co-

operatives Umudike Umuahia for the purpose of this

35



research. Data were collected from two main sources, the

primary and secondary sources. The generated specifically

for the research work and which because necessary in order

to gain insight into the research topics and to prove as much

as possible the authentically of the study primary were

collected through questionnaire administered on the

members of agricultural credit co-operatives Umudike

Umuahia.

Secondary data on the other hand consists of

information that is related to the research which were

already in existence, they serve as a stepping stone because

the knowledge gathered by others on related topics quips a

researcher in his efforts to generate primary, data secondary

data were usually collected from textbooks, journals and

unpublished works.

3.4 METHOD OF DATA ANALYSIS

The researcher will administer questions to co-

operators both in government work and the officer of co-

36



operative societies. From the questions administered,

information’s gathered will be analyzed through the usage of

percentage as required informal guide.

For example of 100 questions are to be administered,

the Reponses from the respondent will be apportion from the

percentage.

For example

25 – 83%

5 – 16.9%

Total percentage 100%

37



CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA

4.1 PRESENTATION OF DATA IN TABLE

From the farmer’s questionnaire carried out, the

number of respondents and the statistical data collection are

represented table below.

Question No 5: What area of farming do you operate on?

Table 1.1 Analysis of response to question No 5

OPTION RESPONDENT PERCENTAGE

Crop 15 60

Cattle rearing 10 30

Poultry 5 10

Total 30 100

From the table, it can be seen that the area of farming

operate are crops that is the crop that can be produce is

60% while the cattle rearing is 30% and poultry is 10%.

Question No 6: Which financial institution do you work

with?

38



OPTION RESPONSES PERCENTAGE

NACRDB 10 33.3

NCCUN 10 33.3

Commercial bank 10 33.4

Total 30 100

From the table, it can be seen that the researcher has equal

number of respondent from the three (3) financial

institutions.

Question No 7: What level of production do you belong?


Cash crop 10 40

Food crop 15 60

Total 25 100

From the table, it can be seen that the level of production

that the farmers operate are food crops that is the crop that

can be produced and also be sold utilize in the country and

about 40% produced cash crop which can be sold to another

country.

Question No 8: Do you operate small scale farming?

TABLE 1.2 ANALYSES OF RESPONSES TO QUESTION

39




Yes 22 88

No 3 12

Total 25 100

From the table, it can be seen that 88% of people operate

small scale firming while 12% did not.

Question No 9: Have you received credit before from your

agricultural credit co-operative for your production.

OPTION RESPONSES PERCENTAGES

Yes 15 70

No 10 30Total 25 100

From the table, it can be seen that 70% of people received

credit and 30% of people did not.

Question No 10: If yes, what did you use the credit for?


Solving Household

problem

10 33.4

Financing small 10 33.3

40



scale farming

Others 10 33.3

Total 30 100

From the table, it can be seen that the researcher has equal

number of respondent from the three (3).

Question No 11: Have you encountered problem of not

getting enough fund from the co-operative?

TABLE 1.3 ANALYSES OF RESPONSES TO QUESTION

11


Yes 6 76

No 19 24

Total 25 100

From the above it can be seen that most farmers does not

encounter problem of getting fund from the co-operative.

This can be because the farmers are member of the co-

operative society so they don’t find it difficult to obtain

enough funds from the society.

41



Question No 12: As a member of the agricultural credit co-

operative, do you normally go through a long process before

getting loan from co-operative?

OPTIONS RESPONSES PERCENTAGE

Yes - -

No 25 100

Total 25 100

From the table, it can be seen that the farmers being

members of the agricultural credit co-operative does not go

through a long process before loan can be distributed to

them.

Question No 13: As a small scale farmer is the condition of

the loan favorable to you?

TABLE 1.4 ANALYSES OF RESPONSES TO QUESTION 13


Yes 22 88

No 3 12

Total 25 100

From the table above, it shows that the condition of the loan

is favorable to about 88% of the farmers. This can be

because the farmers are already members of the agricultural

credit co-operative. As a member, he or she should know

42



the condition of the loan of his co-operative society and also

has seen it favourable.

Question No 14: Have you ever made an attempt as an

individual to get credit from financial institution for

production.



Yes 26 86.7No 4 13.3

Total 30 100

Question No 15: If yes, how successful has your attempt

been?

TABLE 1.6 ANALYSIS OF RESPONSE TO QUESTION 15


Very successful 30 100

Partly successful - -

Unsuccessful - -

Total 30 100

From the table above, it shows how successful your attempt

is, it shows that is very successful.

43



Question No 16: Are the financial institutes involved in

Agricultural financing actually interested in financing small

scale farmers.



Yes 2 8

No 23 92

Total 25 100

From the table it can be seen that financial institutions

involve in agricultural financing are not interested in

financing small scale farmers. This response is from the

experience of small scale farmers that had gone the financial

institutions for loan they have gotten response that are not

favorable for them.

Question No 17: Do the society help members to make

sure that the credit is been utilized properly?



Yes 25 100

No - -

Total 25 100

44



From the table, it can be seen that the small scale farmers

pay interest on loan in their agricultural credit co-operative.

Despite the fact that they are members they also pay

interest on loan.

Question No 18: Do the small scale farmers able to provide

the collateral needed for the loan?


OPTIONS RESPONSES PERCENTAGEYes 25 83.3

No 5 16.7

Total 25 100

From the table, it can be seen that the small scale farmers

are not able to provide collateral on the loan to these

financial institution. This situation can bring about difficulty

of these small scale farmers to obtain loan form the financial

institution.

45



CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND

RECOMMENDATIONS

In this chapter, findings from the analysis data

conducted interview and reviewed literature shall be stated

by the researcher, conclusion and recommendations shall be

dearly enumerated.

5.1 SUMMARY OF FINDINGS

Agricultural credit co-operative is a co-operative society

that advances credit to small scale farmers for their

46



agricultural production. Ordinarily, it is noted to be of

paramount important to the survival and increase in

production of the small scale farmers considering its

objectives. More as the researcher was able to find out the

following in the course of study.

1. The credit which the farmers that are members to an

agricultural credit co-operatives receive form the co-

operative are very effective to their production. This

shows that the small scale farmers enjoys and also

benefit form the agricultural credit co-operative from

their production.

2. The small scale farmer do mot encounter problems

of not getting enough funds they need for their

production form the agricultural credit co-operatives.

3. The conditions of the credit are favourable to the

small scale farmers

4. The small scale farmers do not go through a longer

process before getting loan/credit from the

agricultural credit co-operatives. The agricultural

47



credit co-operatives are always ready financially to

disburse finance to their members in each farming

season.

5. It was found out that small scale farmers have gone

to the financial institution for agricultural credit but

their attempt was ineffective due to some conditions

that they were not able to comply with.

6. It was found out that the small scale farmers that

some agricultural financial institutions are not

interested in advancing credit to them because of

their level of exposure, illiteracy and had not been

able to provide the collateral needed by those

financial institutions cannot easily reach them.

7. The small scale farmers pay interest on loan in the

agricultural credit co-operative but it is not

comparable to that of high rate in the financial

institutions.

8. The agricultural credit co-operatives help the small

scale farmers by making sure that credit advanced to

48



them are been utilized properly to increase their

production.

9. The illiteracy of these small scale farmers makes it

difficult for the staff of the financial institutions to

disburse loan efficiently to the small scale farmers.

10. The small scale farmers found it difficult to provide

the collateral needed for the loan by the financial

institutions

11. From the findings, it was seen that these financial

institutions does not easily get access to the rural

areas where most of these small scale farmers

reside.

5.2 CONCLUSION

Agricultural credit co-operatives is an agricultural

organization whereby two or more people with a purpose

and a similar objective come together, to seek solution to

achieve their objective by applying co-operative principles,

rules and ideology.

49



It can be seen \from the finding that the small scale

farmers due to their financial incapability they can’t afford

the collateral used, to obtain credit from financial

institutions. And also, low level of exposure and

enlightenment, illiteracy makes it difficult for them to

interact with terms our procedures for obtaining loan from

financial institutions. It was also observed that these small

scale farmers were unable to obtain loan because of the risk

involved in farming which were unable to control and which

can bring default of repaying the loan, it was also found out

that the financial institutions staff are always reluctant to

travel to the rural areas where the small scale farmers in

disbursing loans and also to supervise them on the project

to avoid default of loan. It can be clearly seen that the able

supplements for financing small scale farmers was the

agricultural credit co-operatives. This co-operative admit the

small scale farmers as members of the cop-operative and

help them by educating them on modernized methods of

farming and the best way to utilize credit also to make sure

50



that the credit given to them was utilized for the purpose it

was given and the co-operative will closely supervise them

to ensure effectiveness and increased production.

5.3 RECOMMENDATIONS

The researcher recommends the following remedies

from the findings carries out in the work

1. That there is need to establish more agricultural

credit co-operatives in different areas especially

in rural areas to be able to advance credit to

their small scale farmers.

2. That there is need to create awareness of this

agricultural credit co-operatives to small scale

farmers to make them able to know the

importance and what they can benefit from the

co-operative.

3. That the government should always give fund

for agricultural development through the

51



various agricultural credit co-operatives in the

country.

4. That this agriculture credit co-operative will be

able to really analyze the project, the small

scale farmers want to embark on and also

educate them on modernized methods for easy

increase in production.

5. That the government needs to provide subsidies

for small scale farmers through agricultural

credit co-operatives because through these

cooperative they will be able to obtain the

subsidies quicker and easier for production.

6. The agricultural credit co-operative must have

grassroots support, it therefore should have at

the lowest cadre “the primary agricultural credit

co-operatives society” at the state level these

primary societies would come together to form

one single state apex like ACFC. At the national

52



level, the state apexes come together to form

their national body of the organization.

7. That agricultural credit co-operative must avoid

external influences and control, it must rely on

outside assistance and support for better

efficiency.

8. That agricultural credit co-operatives must

organize as a matter of priority, workshop and

seminars for leaders of the co-operative in the

primary level to acquaint them with new

farming techniques and creditor control.

9. Those agricultural credit co-operatives should

operate on co-operatives principle and ideology

to ensure maximum co-operation management.

10. That agricultural credit co-operatives should

also help the small scale farmers to see a better

market to display and sell their product.

From the recommendations, it can be seen that

agricultural credit co-operatives will raise small scale

53



farmers to be the nation’s cash crop exporters, and it can

help in the development of the nation because when these

remedies are carried out it will be truly a design strategy to

meet the special need of small scale farmers. It will also free

the small scale farmers of bureaucratic delays and neglect

characteristics of farmers schemes, protect small scale

farmers form unserious interest charge of money lenders, it

would also give small scale farmers a sense of belonging

because they would see themselves as part of the

organization since they are shareholders. This would also

give the sense of pride and therefore they will feel

committed to the ideal of the co-operation to see the

progress always through this there will be increase in the

production of food stuffs, which is highly needed to support

the ever-increasing population of the country.

54



BIBLIOGRAPHY

AYODELE E.I.O (2001) “Nigeria Agriculture:

Problems and Prospects in M.O OJO

et al (d) Ibid.

AWOYEMI O. (2003) Problems of Agriculture in Nigeria: In

M.E.C. Edoru and Ayo Akiongbade.

Lagos University Press, Nigeria.

EZEANOZIE A. N. (1989): Financing Co-operative Projects.

Experience and Lessons. A paper

Presented at the National Seminar on

C-operative Development. Federal

Ministry of Information News watch

Magazine.

IKE D.O (2003): Rural Banking Programme in Nigeria,

Lagos King and George Printing press.

55



IKE D.O (2001) Appraisal of Agricultural Credit Guarantee

Scheme Fund in Nigeria.

Nigeria Journal of Financial

Management.

OKAFO OKOREAFFIA (2005): Co-operative Policy and

Legislation. Publisher in

Nigeria by Dab2s Enterprise

Owerri Imo State.

TONY A. (2006): Introduction and Principles of C-

operation. Owerri Don Ell Printing and

Publishers Co.

OGUJIOFOR E.A (2003): C-operative Practitioners

Fieldwork Administration

Nkem Publisher Owerri

Imo State.

56



DICKSON I.O (2005): International C-operation and Co

operative Development in Nigeria.

Publish in cyprint, Aba Abia State

OBI-OKOGBO E.J (2006): Essentials of C-operative Field

Work Administration. Publish in

Advanced Graphic, Owerri, Imo

State.

OKONKWO M. (2005) Agricultural C-operative Extension

Publisher in Nigeria by Dab2

s

Enterprises Owerri Imo State.

SEMOWD B.I (1978): Financing Agriculture Delivered at

13th Annual Seminar of NIB.

WRIGHT J.A (1981): Problem of Agricultural Financing

Bullion Delhi Vands Publication Ltd U.S.A.

57



QUESTIONAIRE FORMAT

APPENDIX

Your Department,

Your school,

P.M.B 1036 city.

Your State.

4th August, 2010.

Dear Sir/Madam,

AGRICULTURAL CREDIT CO-OPERATIVES AS VIABLE

SUPPLEMENTS FOR FINANCING SMALL SCALE

FARMING IN NIGERIA.

I am an HND final year student of of the above school,

conducting a research on the agricultural credit co-

operatives as viable supplements for financing small scale

farming in Nigeria with a case study of selected agricultural

credit co-operatives in Umudike, Ikwuano L.G.A. The

research is in partial fulfillment of the requirements for the

award of Higher National Diploma (HND) in your dept

58



Please answer the following questions as truthfully and

correctly as possible and be assured that your answers will

be used only for the purpose of the research.

Thanks for your co-operation.

Yours Sincerely,

Your name

59



QUESTIONAIRE

SECTION A

INSTRUCTIONS: Please tick where applicable

SEX: MALE FEMALE

AGE: 20-3- 30-50 50 and above

STARUS: SINGLE MARRIED

EDUCATIONAL QUALIFICATION: FSLC SSCE

5. What area of farming do you operate on?

a) Crop

(b) Cattle rearing

(c) Poultry

SECTION B

6. Which financial institution do you work with?

a) NACRDB

b) NCCUN

c) Commercial Bank

60



7. What level of production do you belong?

a) Cash Crop

b) Food Crop

8. Do you operate small scale farming?

Yes No

9. Have you received credit before from your agricultural

credit co-operative for your production?

Yes No

10. If yes what did you use the credit for?

a) Solving household problem

b) Financing small scale farming

c) Others

11. Have you encountered problem of not getting enough

fund form the co-operative?

Yes No

12. As a member of the agricultural credit co-operatives,

do you normally go through a longer process before

getting loan from co-operative?

Yes No

61



13. As a small scale farmer is the conditions of the loan

favorable to you? Yes No

14. Have you ever made an attempt as an individual to get

credit from financial institution for production?

Yes No

15. If yes, how successful has your attempt been?

a) Very successful

b) Partly successful

c) Unsuccessful

16. Are the financial institution involved in agricultural

financing actually interested in financing small scale

farmers?

Yes No

17. Do the society help members to make sure that the

credit is been utilized properly

Yes No

18. Do the small scale farmers able to provide the

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