Economic analysis of the role of microfinance banks in funding agriculture in rural areas of Kwara state, Nigeria

Abstract

The quest to meet the credit need of the Nigerian farmers necessitated the focus of this study. Specifically, the study examined the contribution of microfinance banks (MFBs) towards agricultural development, analyzed and compared the loans given out by these banks to agricultural sector with those given to other investment activities in the study area, examined the repayment level of the various sectors and identified the constraints hindering efficient contribution of the banks to agricultural development in the study area. Data obtained from ten MFBs in Kwara State were used for the study. Descriptive and inferential statistics were used for data analysis. The study revealed that most of the banks’ loan were granted to trade and commerce sector while the agricultural sector obtained just about one-fifth of loan disbursement annually. As regard loan recovery however, the agricultural sector compared more favourably than other sectors to which more loan was disbursed. The problems facing the MFBs in making more
contribution to agricultural development in the study area include less saving habit of farmer clients, limited loan products, shortage of logistics in rural areas, less willingness of the commercial banks to lend MFBs, shortage of experienced human resources, inadequate capital to operate and lack of effective management information system. The study calls for more contribution to the agricultural sector by the banks and proffers solutions to the constraints limiting their role in agricultural development.

Keywords: Credit, role, microfinance banks, agricultural development, problems.