ABSTRACT

The study analyzed determinants of transaction costs for borrowers among farmers in lkwuano local government area of Abia State, the specific objectives were to; examine the socio-economic characteristics of the respondents in the study area, evaluate transaction costs incurred by borrowers in the study area, estimate and analyze factors that affect transaction costs and identify the constraints in accessing credit. Multi-stage randomized sampling technique was used to elicit data from 60 borrowers in the study area. Descriptive statistics were used to evaluate transaction costs, socio-economic characteristics of the respondents as well as constraints to credit access in the study while regression was employed in the analysis of determinants of transaction costs. The study revealed that distance to the credit institution, age of the farmer, interest rate, loan size were positive and significantly related to transaction costs. Assets of the farmer, membership to cooperative organization and information services were negative and significantly related to transaction costs. Level of education of the farmer, savings and gender were positive but not significant to transaction costs. Also, lack of collateral and high interest rates was the most important constraints of borrowers in the study area. The study calls for policies aimed at making more credit available to young and energetic farmers and lending institutions should also be located closer to farmers to reduce costs. Policies should also be targeted to reduce interest rates.