Determinants of demand for credit among rural dwellers in the North Central Nigeria

Abstract

This paper examines critically the key factors influencing demand formicrocredit among rural households in north central Nigeria.. A multistage sampling procedure was used to select 462 microcredit beneficiary households across two states (Kogi and Kwara) in the study area. Data were obtained on socio-economic characteristics, social capital variables, microcredit use as well as food and non- food expenditures of sample households using structured questionnaire. Data were analysed using descriptive statistics, and multinomial logit. Mean age of the household heads and household size were 42.7 years and 7.0 persons respectively while 81.8% of them were married. Mean number of years of formal education was 11.6 years. The mean monthly expenditure on food and non-food was N15, 335.85 per month. Common sources of credit available to the households were cooperative societies (53.0%), banks (25.1%) and government agency (6.5%). The average amount of credit granted by credit institutions was N164926.4 per month. Only 46.0% of the credits needed by the households were granted with an average interest rate of 10.10%. Being married by household head increased the probability (p<0.05) of getting credit from commercial banks, cooperative societies and friends and family. Household size increased the likelihood (p<0.01) of demand for credit from government agency. Heterogeneity index and level of participation in decision making increased the likelihood of demand for credit in commercial bank, cooperative and money lenders respectively. Cash contribution index increased credit demand in commercial bank and cooperative (p<0.1). Interest rate increased the probability of sourcing for credit in bank, cooperative and money lenders (p<0.05). The study concluded that microcredit and social capital had significant impact on rural household's demand for credit. The study recommended that households should be encouraged to participate more in social group