Determinants of rural bank loan repayment capacity among farmers in Yewa Division of Ogun State, Nigeria

Abstract

This study examined the determinants of the Nigeria Agricultural Cooperative and Rural Development Bank (NACRDB) repayment by farmers in Yewa division of Ogun State. Primary data collected through scheduled interview with the help of a structured questionnaire as well as secondary data were used for this purpose. Descriptive analytical tools, linear discriminate function, and multiple regression analysis were used to analyze the data collected. Results show that majority of the respondents attributed reasons for loan default to production failure due to weather, pests, diseases and poor storage (72.5%). Furthermore, a good proportion of loan defaulters (52.5%) use the loan for farming. Discriminate analysis conducted shows that the total annual income of the household heads, other occupation of the respondents and membership of cooperative society are the most significant variables that discriminate between rural bank users and non-­‐users. The regression analysis shows that the most important variable for loan repayment is farm size (hectares) accounting for 32% of the variations in repayment level of the credit user, followed by farm income(0.29%). It was suggested that NACRDB loans should be disbursed through farmers’ cooperative society, with adequate monitoring and supervision.