Determinants of access to formal and informal agricultural loan among farmers in obubra local government area, cross river state, nigeria

This study investigated the determinants of access to formal and informal agricultural loans among farmers in Obubra Local Government Area of Cross River State, Nigeria. Specifically, the study described the socio-economic characteristics of the respondents in the area, identified the formal and informal sources of agricultural loans, analyzed the factors that determine the access of farmers to formal and informal agricultural loans and identified the farmers constraints in acquiring loan from formal and informal sources in the area. Primary data were collected by using multi-stage random sampling technique. Data were analyzed with descriptive statistics and binomial test model. Majority 60% of the respondents were females, about 67% were married and 32% were between 31-40 years of age. Also, about 48% had secondary education and 38% had farming experience of 15 years and above. About 81% obtained loan from informal sources while only nineteen percent (19.23%) obtained loan from formal sources. The binomial test results revealed that farming experience, education level, guarantor, farm size, farm income, household size, and cooperative societies’ participation significantly influenced loan accessibility by formal loan sources users while gender, marital status, guarantor, farm size, and household size significantly influenced loan accessibility by informal loan sources users. Critical constraints of loan acquisition from formal sources were lack of guarantor, distant to loan sources and repayment period among others while high interest rate, lack of guarantor, repayment period and amount granted were identified as critical constraints of loan acquisition from informal loan sources. Formal financial institutions should relax their conditions on collateral and guarantor for obtaining loan. Farmers should be encouraged to join farmers’ cooperatives groups to enable them pull their resources together in order to benefit from formal sources of loan.