ABSTRACT

The study was carried out to examine the Effect of Informal Credit Sources on Performance of Cassava-based Farmers in Akwa Ibom State, Nigeria.  The objectives of this study were to: identify the informal credit sources utilized by cassava-based farmers in Akwa Ibom State, estimate the determinants of choice of informal credit sources by cassava-based farmers in the study area, estimate the determinants of performance of the cassava-based farmers in the study area, examine the effect of informal credit on performance of cassava-based farmers in the study area and identify constraints faced by cassava-based farmers in accessing informal credit in the study area.  Three hypotheses were tested in this study.  Multistage sampling procedure was used to select 96 informal credit beneficiaries and non-beneficiaries respectively to make up a total of 192 respondents for the study.  Data collection was done through the application of structured questionnaire and interview schedule.  Analyses of data were done using descriptive statistical tools such as frequencies and percentages and inferential statistics such as Ordered Probit Regression Model, Ordinary Least Square (OLS) Regression Model and Chow Test.  The major sources of informal credit in the study area were Rotatory and Non-Rotatory Savings and Credit Associations, Village Cooperatives and Daily Money Collectors (Etibbe).  Ordered probit regression estimates of determinants of informal credit sources showed that out of the nine explanatory variables, six were statistically significant with five exhibiting positive effects (sex, age, interest amount, educational level and farm size) and one exhibiting negative effect (annual net farm income). The significant variables that positively influenced the performance of informal credit beneficiaries were farm size, farming experience, amount of credit used, household size, educational level and cost of farm inputs; age of farmers and interest amount charged on credit were negative and significant for the beneficiaries.  On the other hand, the significant variables that positively influenced performance of non-beneficiaries were farm size, farming experience and educational level while the household size, distance to market and total cost of farm inputs negatively influenced the performance of non-beneficiaries. The Chow test analyses of effect of informal credit on performance of cassava farmers in the study area showed inequality between the coefficients of informal credit beneficiaries and non-beneficiaries in the study.  The result also confirmed heterogeneity of slopes and shift in intercepts between the two groups.  Inadequate credit, short repayment time, late disbursement of credit and inability to repay credit were the major constraints to informal credit access in the study area. Among other recommendations, the study recommended that informal credit sources should be improved to compete favourably with the formal credit sources through a direct linkage between Central Bank of Nigeria (CBN) and the informal credit sector to facilitate the direct extension of credit to the sector without going through intermediaries.