Farmers patronage level of informal credit in Imo State: implications for efficient formal and informal financial linkage and rural development

Abstract

Low agricultural productivity in Imo State could be attributed to poor grass root financial development. Farmers are increasingly marginalized by the conventional banks especially in credit delivery and this study is designed to facilitate a formal and informal credit linkage format. Data were collected from 59 arable crop farmers and 15 informal financial agencies and analyzed using both descriptive statistics and ordinary least square estimates. The result showed that 52% of the farmers were females and 42% of the total respondents had acquired secondary education with a mean farming experience of 16 years. About 81.4% of them inter planted cassava with either maize or beans. It was shown that more than 93.2% of the farmers belonged to Town Union/Age Grade with either Cooperative or Esusu or both, access financial assistance from them. The highest credit disbursement could be accessed from the Town Union with a total of and a mean value of 1,469,000 and N26, 709 respectively, which ranges from N9, 000 to N60, 000 per annum. Farmers mean patronage of informal credit services was as high as 71.2%, thus explaining the reason for low status of rural development in the state. The low patronage of Town Union despite its high membership was due to their involvement in other community development projects. Educational level of the farmers, framing experience, household size and social capital had direct but significant effect on the increasing rate of farmer’s patronage of informal credit, while high interest rate reduced the rate of patronage of informal credit in the area. The study therefore suggested that the grass root financial development should facilitate development using the existing social mobility such as social capital and enhanced education.

Keywords: Patronage, formal and informal credit, financial linkage, rural development