The Structure, Functioning and Potentials of Indigenous Cooperative Credit Associations in Financing Agriculture: the Case of Anambra and Benue States, Nigeria



Small-scale farmers are faced with credit constraints from both formal and informal sources. From the informal sources they are faced with very scarce and unreliable supply and consequently, expensive credits. From the formal sources, the reluctance of      commercial banks and other institutionalised credit sources to lend to the agricultural sector, is ell known. Thus, despite changes realized by           the establishment of various institutionalized agricultural credit sou:ces, most s all scale farmers still find it difficult to obtain credit for investm ent.

Thus, t !:i S study specifically seeks to evaluate the organization al structure and functicning of n igeno us credit associations; analyze cheir effectiveness in m eeting members’ credit needs; det ermine ext2,1t i:o ‘.{,ich savings a:1d credit used for results shew that indigenous associations possesscommunities selected in Anambra and Benue States. The sample of 5 indigenous associations per community was drawn randomly from the associations• list compiled in each community.  In all, 30 indigenous savings and credit associations  were selected.  Five members of each association ·11ere randomly selected. Thus, 150 members of savings and credit associations were selected and       studied in na bra and Benue States.

an    organizational form, not stereo-typed or standardized, but s.L-nple and     flexible to accommodate members’ various levels of understanding and to achieve the objectives

Inter-state comparison showed that between 1986 and 1988, 189 loans valued at H18,134.OO or an averageaverage of N111.33, while that of 1987 totalled 143 loans amounting to N12,79O or an average of N89.44. The corresponding data for 1988 was 201 loans valued at N19,498 or an average of N97.OO.

of H95.95 were made in Anambra while a total of 238 loans to talling ;i 2 3 , 394 .OO ( or an average of i0i98.  29)

were ade in □e nue State.

The data on use of savings in 1988 show that a large p oportion ( 67% ) of total savings was put to productive pur oses , which included farm and non-farm uses. farm-related expenditure accounted for raore than one-third oi the total expenditure from tot al savings, ar;id out of this proportion, labour-related expenditure constituted ti,2  lar;est single use, judged by           either the proportion spent on it a by         the avera0e a ount (177.0) or y       t e nu8ber of   espo ndents who used sav ings fo r ti1is pur?ose .

A c hi-squ are test of difference which examined the

ela :ion of statu of farm inJ to the proportion of sav.i put to farm use, , , a s hiqhly signific ant at 0.95 and O.99 levels of si0nificance, showing that the related to borrowing.The relationship between savings/credit and some socio-economic variables was tested by analysis of variance. Age, level of education, number of associations belonged to and farming status, were found to be significantly related to savings. On the other hand, household size, number of associations belonged to, farming status and farm size, were significantlyrelation of farming status to the proportion of savings put to farm use was not by chance. Generally, the respondents had a high opinion of their associations• savings activities.

A ultiple classification analysis (M.C.A) was used to deter ine the extent each variable affected savings. Olde,r farmers affected savings more than the younger ones and age generally accounted for 5.3% of all

variations 9n     savings. Number of       associations belonged to, with an eta value of 021 accounted for 4.4% of all variations. It was also revealed that those who belonged to fewer associations in a given time saved more in each association. Farming status on the other hand, with an eta value of .28, explained 708% o all variations en savings. The multiple R squared value of 0.331 showsthat age, level of education, number of associations belonged to, accounted for 38.1% of the variations in savings.

To obviate seasonal shortages in labour, it was established that some members in 46.7% of all the associations banded themselves into workgroups for the purpose of working on various farm operations in members’ farms. The ajority of respondents ( 72%) were of the view that workgroups enabled them carry out more ‘dork on their f urms while 20% claimed that the additional labour was satisfactory in the sense that it would lead to higher output, by bringing additional land into cultivation.

There was also evidence o   group investment especially in cassava, yam, maize, legumes and rice cultivation.






with a land area of 981,849km2, 75% of which is cultivable, J\!ioeria could be regarded as being rich in agricultural resources. Its tropical climate and a myriad of soil types enable the production of various crops and livestock species. The agricultur2l sector employs about 70% of the working pooulation out of the estimate d total populati on of about 100rillion ( Otiti , ‘1S78).

rt is not surprising then that up to 196C, the agricultur2,l sector accounted for about 6 2% of  ‘ioeria’s GDP with 95<;; of the production in the hcnd s of small­ scale farmers. The discovery of mineral oil in 1959 however le to t e decline in agricultural output as the sector was neglected in favour of petroleum. Thus con­ tributions of the agricultural sector to the total GDP declined from 62.9% in 1960-61 to 48.8 in 1969-70 and

18% in 1979-80 (Table 1.1).

Fol lmdng the sarne pattern, the sh 2re of agriculture in total export which was 85.6% in 1960 declined to 30 in 1970 an 2.2o/          in 1982. The expenditure on imported food on the other hand, increased from N15.6m to N46.98m

in 1962, declining to N43.8m and N41.24m in 1963 and 1964.

respectively, only to rise again in 1965 and 1966 by 11.7% and 11.9% respectively (Otiti, 1978). By 1970 (Table 1.2), the value of Nigeria’s food import stood at H57.7rn and rose to H126.3rn in 1973, which represented an increase of over 118.9% over that of 1970. By 1978, the value of Nigeria’s food import had reached H1,108.7m only to decline to Nl,100.8 in 1980. Although the Structural Adjustment Programme brought with it a reduction in food importation, the lower exchange value

of the naira implies that more naira was involved in less food importation. Therefore the figures for 1986, 1987

and 1988 which represent SAP years, were characteristically

This resort to massive importation of food had its negative effect on domestic agricultural production: it became a disincentive to local producers because the lower cost of production abroad gave rise to lower prices of imported food items than those of domestic foodstuffs ( Ijere, 1988a).

Given this precarious food situation, the Federal Government adopted various measures to stem the situation through some structural and fiscal policy actions. Some of these measures include the establishment of various


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