Credit Access and the Performance of Small Scale Agro- Based Enterprises in the Niger Delta Region of Nigeria
Credit Access and the Performance of Small Scale Agro- Based Enterprises in the Niger Delta Region of Nigeria.
ABSTRACT
The study was designed to analyze credit access and performance of small scale agro- based enterprises in the Niger Delta region of Nigeria. A multi-stage sampling technique was adopted in selecting 264 and 96 agro-based enterprises that accessed informal and formal credit respectively, through the use of structured questionnaire and oral interview. A total of 360 respondents were selected and used for the study.
Socio-economic characteristics of the enterprises were described using descriptive statistical tools such as percentages, means and frequencies. The logit model was used to examine enterprise characteristics that had significant influence on informal and formal credit access by small scale agro-based enterprises.
The Heckman model was used to examine the factors affecting informal and formal credit amount accessed. The Poisson regression model was employed to examine the factors affecting frequency of informal or formal credit access by the enterprises. Current ratio and return on capital were employed to examine the performance of enterprises that borrowed from informal and formal credit markets in the area.
Separate treatment of Informal and Formal Credit served to identify the similarities and differences between the credit source concerning the determinants of credit access, amount of credit accessed, frequency of access, credit default and financial performance of the enterprises. The results showed that 60.13% of small scale agro-based enterprises had access to the informal credit market, whereas only 21.86% had access to formal credit market.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgment iv
Table of Contents v
List of Tables viii
List of Figures ix
Abstract x
CHAPTER ONE : Introduction
- Background Information 1
- Problem Statement 2
- Objectives of the Study 10
- Hypotheses of Study 10
- Justification of Study 11
CHAPTER TWO: Literature Review
- Concept and Definition of Small Scale Enterprises (SSEs) 13
- The State of Nigeria’s Agro-Based Industries 14
- Small Scale Agro-based Enterprises in Niger Delta 18
- Access to Credit 21
- Limitation to Credit Access 22
- Access to Credit among SMEs 24
- Credit Constraints 26
- Credit Default 28
- Empirical Evidence on Credit Accessibility 32
- Theoretical Framework 36
- Frame work of Credit Access 36
- Framework of Credit Constraints 41
- Framework for Credit Default 43
- Framework of the effect of credit 45
- Analytical Framework 46
- The Logit model 46
- The Heckman Model 49
- The Poisson Regression Model 51
- The Probit Model 52
CHAPTER THREE : Methodology
- Study Area 54
- Sampling Technique 55
- Data Collection 56
- Data Analyses 56
CHAPTER FOUR: Result and Discussions
- Socio-Economic Characteristics of Enterprises 65
- Distribution of Respondent Enterprise by Age 65
- Distribution of Respondent Entrepreneurs by Gender 66
- Distribution of Respondent Enterprises based on Accessibility
to Credit Market 66
4 1.4 Distribution of Respondent Entrepreneurs by years of borrowing Experience 67
4.1.5 Distribution of Entrepreneurs based on level of education 68
- Determinants of Credit Access by Small Scale Agro-based Enterprises 68
- Determinants of Informal Credit Access 68
- Determinants of Formal Credit Access 70
- Factors that Influence Credit Amount Received by small scale Agro-Based Enterprises 73
- Informal Credit Access by Small Scale agro based Enterprises(First Hurdle) 73
- Informal Credit Amount received by Small Scale agro based enterprises (Second Hurdle) 75
- Formal Credit Access by Small Scale Agro Based Enterprises (First Hurdle) 78
- Formal Credit Amount Received (Second Hurdle) 79
- Determinants of Frequency of Credit Access by Small Scale Agro-based Enterprises 82
- Frequency of Informal Credit Access 82
- Frequency of formal Credit Access 84
- Determinants of Credit Default 87
- The determinants of informal credit default 87
- Determinants of Formal Credit Default 89
- Performance of Enterprises in the Region 91
- Current ratio of small agro based enterprises 91
- Mean Current ratio 92
- Return on Capital Employed by Small agro based Enterprise 93
- Meanreturn on capital employed 94
CHAPTER FIVE Summary, Conclusion and Recommendations 96
5.1. Summary 96
- Conclusion 99
- Recommendations 100
- Contributions to Knowledge 101
- Suggestions for Further Research 102
REFERENCES 103
INTRODUCTION
Studies on developing economies have considered financial development vital for economic growth and poverty reduction. Strong financial systems have helped delivered rapid growth as well as direct and indirect benefits, across income distributions (Honohan and Beck, 2007). Beck and Demirguc-Kunt, (2005) indicate that financial development reduces inequality by disproportionately boosting the income growth of the poor.
Hence across Africa, access to finance is rightly seen as a key to unlocking the income growth for poor families, as much as for expanding trade (Honohan and Beck, 2007). In this regard, policy makers have held the conception that micro and small scale firms in developing countries lack access to adequate financial services for efficient inter-temporal transfers of resources and risk coping (Besley, 1995).
Without well- functioning financial markets, small scale firms may lack much prospects for increasing their productivity in many significant and sustainable ways (Nwaru, 2004). Based on these reasons, and the fact that traditional commercial banks typically have minimum interest in lending to small firms due to their lack of viable collateral and high transaction costs associated with the small loans that suit them, most developing country governments, have set up credit programs aimed at improving access to credit (Arene, 1993; CBN, 2010).
REFERENCES
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CSN Team.
