Determinants of formal agricultural credit allocation to the farm sector by arable crop farmers in Benue State, Nigeria

The aim of this study was to determine the effects of socio-economic and demographic factors on the rate of credit allocation to the farm sector by arable crop farmers in Benue State, Nigeria. Cross-sectional data were obtained from 300 randomly selected loan beneficiaries. Obtained data were analyzed using frequency counts, percentages, t-test and multiple regressions. Results showed a statistically significant gap (p <= 0.001) between the amount of loan applied for and the amount received by farmers. The study also found that only about 56% of the loans were invested directly in farm activities implying that the balance of 43% of the loan was diverted and spent on non-farm activities. Factors that significantly (p <= 0.005) affected the rate of credit allocation to the farm include age, education, farm size, household size, length of loan delay and visitation by bank officials. Based on these results, the paper recommends increased flow of capital to the bank for on-lending to farmers. In addition, loans should be disbursed on time and banks officials should be encouraged to pay regular supervisory visits to farmers. Finally, benefiting farmers should be given basic training on efficient management of loans in order to curtail the high rate of loan diversion.