ABSTRACT

This study assessed smallholder farmers’ credit rationing, creditworthiness and distribution by microfinance banks in South-east Nigeria. Specifically, the study described the socioeconomic characteristics of the smallholder farmers; ascertained the loan approval rates of the farmers and estimated the determinants of loan approval rates. The study also estimated the determinants of credit worthiness of the farmers; ascertained the extent of credit rationing among smallholder farmers by microfinance banks (MFBs) and its determinants. Multi-stage sampling techniques were adopted for the selection of 360 small holder farmers who applied for microfinance credit and another 360 smallholder farmers who were discouraged from applying for microfinance banks credit in Imo State and Enugu State of Nigeria. Data collected were analysed using descriptive statistics, multiple regression, credit scoring model for farmers, discriminant analysis, multinomial logit model and the gini coefficient as derived from the Lorenz curve. The result showed that there was little difference in the mean ages of male and female smallholder farmers (36 years and 34 years) for male and female farmers respectively. Fifty per cent (50 %) of males and 50.4 % of female had between secondary and tertiary education, while about 14.4% of males and 16.7% of females had no formal education. Differences also existed in the mean loan approval rate for male and female smallholder farmers (34.3% while 48.9%). Farming experience, age of farmers, relationship with bank, years spent in school, proximity to MFB, household size, farm size, and annual income significantly influenced loan approval rates of male farmers, while farming experience, marital status, years of schooling, proximity to microfinance banks, household size, interest amount, and annual income significantly influenced loan approval rates of female smallholder farmers. Furthermore ,the coefficients of farm size, age of the respondents, annual farm income, educational level, farming experience, proximity to bank, and off-farm income are the significant factors that influenced male smallholder farmers’ discouragement from loan applications in the study area, while coefficients of farm size, age of the respondents, household size, annual income, education level, proximity to bank, and accessibility to account officer are the statistically significant factors that influenced female smallholder farmers who are discouraged from MFBs loan applications. Thirty-three per cent (33.3%) of males and 45.5% of females were credit worthy. Off-farm income, farm size, and loans with other banks positively influenced full rejection of loan application of males while, farming experience, educational level, annual income and banking relationships negatively influenced full rejection of loan application by male farmers. Farm size, loan duration, and default history positively influenced full rejection of loan application by female farmers, while farming experience, educational level and banking relationship negatively influenced it. The study recommended that microfinance banks should be gender neutral when assessing smallholder farmers’ loan applications and also in the disbursement of loans provided that the basic requirements are met.