Constraints of small scale farmers’ access to agricultural credit in Osun State, Nigeria

Abstract

Agriculture is crucial to food security, improved economy and reduction in unemployment. Despite this fact, it has not been given necessary attention. Paucity of funds has continued to militate against small scale farmers, which has significantly hampered their operational expansion for greater output. The study examined the constraints of access to farm loans by the small scale farmers in Ila local government of Osun State. Using the multi-stage random selection technique, two hundred farmers from selected communities across the local governments participated in the empirical study. It was revealed that owing to the lack of funds for the farmers through formal sources like government and financial institutions, majority of the farmers operate at the subsistence level, while relying on shylock local money lenders with exorbitant interest rates for the much needed credit. The constraints in accessing credit from formal sources include; bureaucratic bottlenecks, stringent demands for guarantors and collateral, high interest rates, late approval of loans, and unavailability of banks in the rural areas. It was recommended that government at all levels in conjunction with financial institutions should institute a functional agricultural micro-credit scheme that will ensure the timely provision of credit for the real farmers, create a policy that will compel high net-worth companies to dedicate a percentage of their profits to agricultural financing, as a well as a monitoring mechanism that will ensure judicious use of the loans by the beneficiaries.

Keywords: Agriculture, constraints, farmers, government, loans