ABSTRACT

 In this study, the Savings and Borrowing Behaviour among farm households in Abia State, Nigeria were evaluated. Specifically, the study determined the socio- economic characteristics of the farm households, ascertained the factors that determined the household savings, examined the determinants of household demand for institutional credit and analyzed the borrowing behavior of farm households with respect to sectoral choice among lending sources. A simple random procedure was used in the selection of 162 farm households' heads that had access to formal and informal financial institutions. Four functional forms were estimated using the multiple regression analysis to ascertain the factors that determined the household savings and to examine the household demand for credit. Equally a logit regression model was used in analyzing the borrowing behavior of farm households with respect to sectoral choice among lending sources. The result indicates that the mean ages of farmers was 49.38 years, and with a mean household size of five (5).The functional results showed that farming experience, farm expenses, farm income and interest on cash saved had positive influence on the formal household savings and are significant at 1, 10, 5, and 1 percents respectively while household size had negative influence on household savings and significant at I percent level. However, age of households, educational level, farming experience, farm income and interest on cash saved all had positive influence on the informal household savings and statistically significant at 1 percent respectively. The results also revealed that educational level, household size and interest paid on loans showed positive influence on the formal demand for credit at significant levels of 10 and percent respectively while farming experience and loan duration had negative influence on the household demand for credit at significant levels of 1 and 10 percents respectively. Result on the informal demand for credit revealed that education and distance to the source of loan showed positive influence at significant levels of 5 and 1 respectively. The result also showed that the borrowing decisions of the formal households were affected by the interest payment on loans, distance to the source of loan, loan duration, sex of the farmer, borrowing frequency, time lag, loan purpose and the amount of loan at significant levels of 5, 1, 5, 10, 1 and 5 percents respectively. For the informal results, household size, farm size, interest payment on loan, distance, loan duration, sex, borrowing frequency, time lag, loan purpose and loan amount were significant at 1 and 5 percents respectively.