Loan Demand and Rationing Among Small-Scale Farmers in Nigeria

This paper seeks to examine the nature of risks faced by small-scale farmer-borrowers in Nigeria. It analyzes the demand for agricultural credit among farmers, highlights the key determinants of the demand, and also ascertains the extent to which farmers are credit rationed. The paper evaluates the factors influencing the emerging rationing scenarios in Nigeria and suggests policy measures to address the problem of agricultural credit rationing and enhance the demand for credit. The research for the paper is based on primary data obtained from 1,200 small-scale farmers through a survey conducted in 2013 across the six geopolitical zones of the country. The paper finds that there is a higher probability that farmers will be rejected than that they will be given a loan amount lower than what was requested. It covers the following sections in detail:

• Landscape of the agricultural finance sector in Nigeria;
• Types and sources of data and a review of relevant literature;
• Theoretical and analytical framework for loan demand by small-scale farmers and credit rationing;
• Constraints and opportunities for increased lending to small-scale farmers;
• Farmers’ credit sources, borrowing decisions, and loan demand;
• Nature and determinants of credit rationing among small-scale farmers;
• Summary and policy recommendations.