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The study examined the Effect of Microfinance Services on Agricultural Production of Members of Cooperative Societies in Awka South local Government Area of Anambra State. The study provides empirical evidence on the socioeconomic characteristics of the members of the agricultural cooperatives, the extent to which microfinance banks have provided financial and non financial needs of the farmer, to determine if a relationship exist between the levels of access to microfinance financial and non financial services and the productivity of the farmer members and the challenges farmers face in accessing services of microfinance banks. Three (3) microfinance banks and seventeen (17) agricultural cooperatives were selected using multi stage random sampling as well as judgmental non random sampling. Descriptive statistics and t-test was used to analyze the data collected. The results obtained from the t-test revealed that microfinance banks have provided financial and non-financial needs of farmer cooperative members (p<0.05)and that there is a significant relationship between level of Microfinance banks services and productivity of farmer cooperative members and  in Awka South LGA of Anambra State (p<0.05). Therefore, based on the findings, it was therefore recommended that Microfinance banks in Awka South LGA of Anambra State provide cooperative members with training on modern agricultural techniques for easy and effective production and also proper advice should be given to cooperative farmer members on how best to operate their farm activities.





Title page                                                                                                                                i

Certification                                                                                                                            ii

Approval                                                                                                                                 iii

Dedication                                                                                                                              iv

Acknowledgement                                                                                                                  v

Abstract                                                                                                                                  vi

Table of contents                                                                                                                    vii

List of tables                                                                                                                           x


1.0 introduction                                                                                                                      1

1.1 background of the study                                                                                                   1

1.2 statement of the problem                                                                                                  3

1.3 research questions                                                                                                             5

1.4 objectives of the study                                                                                                      5

1.5 research hypothesis                                                                                                           6

1.6 scope of the study                                                                                                                        6

1.7 significance of the study                                                                                                   6

1.8 limitations of the study                                                                                                     7


2.1 Conceptual review                                                                                                            8

2.1.1 Concept of microfinance                                                                                               8

2.1.2 Microfinance services                                                                                                    11

2.2 Microfinance policy measures and institutions                                                                 14

2.2.1 Microfinance policy measures                                                                                        14

2.2.2 Microfinance policy targets                                                                                           15

2.2.3 Policy objectives                                                                                                            16

2.2.4 Cooperative members                                                                                                    17

2.3 The role of microfinance in agricultural production                                                         18

2.4 Agricultural production and productivity                                                                         20

2.5 The challenges of farmers in accessing microfinance services                                          22

2.6 Review of related empirical study                                                                                    24

2.7 Theoretical Review                                                                                                           27


3.0 Research methodology                                                                                                     28

3.1 Research design                                                                                                                28

3.2 Area of study                                                                                                                    28

3.3 Population of study                                                                                                          29

3.4 Sample technique  and Sample size                                                                                  30

3.5 Sources of data                                                                                                                 33

3.6 Description of instrument for data collection                                                                   33

3.7 Validity of Research Instrument                                                                                      34

3.8 Reliability of Test of Data Collection Instrument                                                                        34

3.9 Measurement of variables                                                                                                 35

3.10 Administration and collection of research instrument                                                    37

3.11 Methods of data analysis                                                                                                            37


4.1 Socioeconomic characteristics of members of cooperative societies                                39

4.1.1 Sex                                                                                                                                 42

4.1.2 Age                                                                                                                                42

4.1.3 Family size                                                                                                                     42

4.1.4 Farm size                                                                                                                        43

4.1.5 Family experience                                                                                                          43

4.1.6 Educational qualification                                                                                               43

4.1.7 Monthly income                                                                                                             44

4.1.8 Monthly savings                                                                                                             44

4.2 Provision of financial and non financial needs of cooperative members by                     microfinance             banks                                                                                                   44

4.3 Improvement of farm productivity of the cooperative members by microfinance banks                         financial and non financial services                                                                            47

4.4 Challenges of access to financial and non financial services from microfinance banks 49

4.5 Testing hypothesis                                                                                                50

4.5.1 Testing hypothesis one                                                                                                   50

4.5.2 Testing hypothesis two                                                                                                  51


5.1 Summary of findings                                                                                                        52

5.2 Conclusion                                                                                                                        53

5.3 Recommendation                                                                                                              54

Reference                                                                                                                                55

Appendix                                                                                                                                60











Table 3.4.1: microfinance banks in Awka South                                                                    30

Table 3.4.2: Distribution of study sample size                                                                        31

Table 4.1: Socioeconomic characteristics of members of cooperative societies in Awka                   South                                                                                                                           39

Table 4.2: Mean responses on the extent to which microfinance banks have provided                     the financial needs of the cooperative members                                                      45

Table 4.3: Mean responses to the extent to which microfinance banks have provided                      the non financial needs of the cooperative members                                                   46

Table 4.4: Mean responses to the extent to which microfinance financial and non               financial services have improved farm productivity of the cooperative members          48

Table 4.5: Challenges faced by cooperative members in accessing financial and non                       financial services from microfinance banks                                                                   49

Table 4.6: T-test on the provision of financial and non financial needs of the farmers’                                cooperative members                                                                                                  50

Table 4.7: T-test on the relationship between the level of microfinance services and                        productivity of farmer cooperative members                                                                      51













1.1 Background of the Study

Lack of access to credit has negatively affected poor farmers and rural dwellers for many years. Rural people need credit to allow investment in their farms and small businesses, to smooth consumption and to reduce their vulnerability to weather and economic shocks. Because they have little access to formal financing institutions, poor rural people follow sub optimal risk management and consumption strategies and rely on costly informal credit sources (FAO, 2010). To this end, Eluhaiwe (2008) noted that microfinance banks were established in Nigeria in 2005 for the purpose of providing economically active poor and low income earners financial services, to help them engage in income generating activities or expand their businesses.

By definition, microfinance refers to the provision of financial services to the poor or low income clients including consumers and the self employed ledgerwood (2010). According to Robert(2009), microfinance refers to movements that envisions a world in which as many poor or near poor households as possible have permanent. Access to an appropriate range of high quality financial services including not just credit but also savings, insurance and fund transfers. In addition, Eluhaiwe (2008) stated that microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions. Three features distinguish microfinance from other formal financial products. These are:

  1. The smallest loans advanced and/or savings collected;
  2. The absence of asset based collateral; and,
  3. Simplicity of operations.

(Bright, 2008) distinguishes between four general categories of microfinance providers. They are; informal financial providers, member owed organizations, Non-Governmental Organization (NGOs) and formal financial institutions. The informal financial service providers include money lenders, saving collectors, money guards, Rotating Savings and Credit Associations (ROSCAs) and input supply shops. For the fact that they know each other well and live in the same community, they understand each other’s financial circumstances and can offer very flexible, convenient and fast services. Member-owned organizations include self help groups and credit unions. Like the informal financial service providers, they are generally small and local though they may have little financial skill.

According to (Brigit, 2008), Non-Governmental Organization (NGOs) involved in microfinance like Grameen bank of Bangladesh and Problem in Bolivia have proven to be very innovative, pioneering banking techniques like solidarity lending, village banking and mobile banking that have become barriers to serving poor populations. Lastly, formal financial institutions engaged in microfinance are state banks, agricultural development banks, savings banks, rural banks and non bank financial institutions. They are regulated and supervised, offer a wide range of financial service and control a branch network that can extend across the country and internationally.

Modern microfinance emerged in the 1970s with a strong orientation towards private sector solutions. This resulted from evidence that the state owned agricultural development banks in developing countries had been a monumental failure, actually undermining the development goals they are intended to serve Adams (2011). The practice of microfinance in Nigeria is culturally rooted and dates back several centuries. The traditional microfinance institutions provide access to credit for rural and urban, low income earners. They are mainly of Self Help Groups (SHGs) and Rotating Saving and Credit Associations (ROSCAs) types. Furthermore, microfinance services particularly those sponsored by government, have adopted the traditional supply-led subsidized credit approach mainly directed to the agricultural sector  and non-farm activities such as training, tailoring, weaving, blacksmithing, agro processing and transportation (CBN, 2008).

Cheryl (2006) asserted that micro financial services are needed everywhere, including the developed world. However, in developed economies intense competition within the financial sector, combined with a diverse mix of different types of financial institutions with different missions, ensures that most people have access to some financial services. Efforts to transfer microfinance innovations such as solidarity lending from developing countries to developed ones have met with little success. However, microfinance has been growing rapidly with $25billion currently at work in microfinance loans. It has been estimated that the industry needs $250billon to get capital to all the poor people who need it (Deutsche bank, 2007).

1.2 Statement of the Problem

Provision of credits usually comes to mind at the mention of microfinance services, but in addition to this, microfinance banks render other services known as non-financial services, which will enable the farmers successfully utilize the funds that are given them. These non-financial services include the provision of training on the usage of modern agricultural technique and farm inputs, management of farm activities, and most importantly, included here is that the farmer is advised on how to protect his health in order to maximize his effectiveness. Although these non-financial activities are important because they enable the farmer become a better farmer, but the importance of financial services cannot be overlooked because the bad economic condition in Nigeria creates a situation whereby there are so many farmers in need of funds. Hence, the very fact that credit comes first to mind when microfinance banks are totally justified. The interest in this research was based on the very fact that the researcher wants to find out real values (statistically) of how much microfinance banks invest in the progress of agriculture, especially small holder farmers.

Smallholder farmers are disproportionately affected by the bad economic situation in Nigeria; hence they are those in the greatest need of both financial and non-financial services rendered by microfinance banks, since their livelihood would be most very much affected in the face of any slightest mismanagement of funds. As would be expected, microfinance banks has been fulfilling the needs of these farmers ensuring that they make the most out of the little they have, and lending them a listening ear in their times of need which ultimately boosts their morale for their(the farmers’) greater good.

In the course of  this research, the researcher made sure to understand the importance of such services rendered by the so-called microfinance banks and made to ascertain if they are doing more harm than good to the farmers, that is by charging ridiculously high interest rates, which will in the end aggravate the bad circumstances of farmers, also if they take their time to understand that environmental phenomena as flooding, drought, wind could lower the yield of crops and hence delay the payment of the interests charged the farmers be it high or low

In some regions in Nigeria, microfinance services be it financial or non-financial is non-existent, therefore in order to successfully research in this area I conducted my project in Awka-South which has these amenities. Of course, the researcher had to conduct a prior research to ascertain of their presence, and to make sure if the farmers who have benefited from these services were willing to give information based on their experiences.

1.3 Research Questions

The study will attempt to answer the following research questions;

  1. What are the socio-economic characteristics of members of the agricultural cooperative societies in Awka South local government area of Anambra State?
  2. To what extent have microfinance banks provided the financial and non financial needs of the farmer cooperative members?
  • What are the relationship that exists between the level of access to microfinance banks financial and non-financial services and the productivity of the farmer members of the cooperative societies?
  1. What are the challenges of farmer members of the cooperative in accessing the financial and non-financial services of microfinance banks in Awka South?

1.4 Objectives of the Study

The broad objective of this study is to examine the extent through which microfinance bank services has enhanced the agricultural production of small holder farmer members of agricultural cooperative societies in Awka south local government of Anambra state. The specific objectives were to;

  1. Examine the socio-economic characteristics of members of the agricultural cooperative societies in Awka South local government area of Anambra State;
  2. Ascertain the extent to which microfinance banks have provided the financial and non financial needs of the farmer cooperative members;
  • Determine if a relationship exists between the level of access to microfinance banks financial and non-financial services and productivity of farmer members of the cooperative societies;
  1. Ascertain the challenges of farmer members of the cooperative societies in accessing the financial and non-financial services of microfinance bank in Awka South.

1.5 Research Hypotheses

H01: Microfinance has not provided financial and non financial needs of the farmer cooperative members.

H02: There is no significant relationship between the level of microfinance services and the productivity of the farmer members of the cooperative societies.

1.6 Scope of the Study

The main focus of this research is to bring to light Effect of microfinance bank services on agricultural production of members of cooperative societies in Awka South local government of Anambra State.

1.7 Significance of the Study

Microfinance service, particularly those sponsored by the government have adopted a traditional supply led subsidized credit approach mainly directed to the agricultural sector and other non-farming activities, but the effect has short lived.

The Nigerian economy stands to derive lot of benefits if concrete steps are to be taken to salvage the agricultural sector opinion are divided as the actual benefit of microfinance policy, regulatory and supervisory framework and how it can develop economy, most especially the agricultural sector because it has grasps of challenges facing agriculture.

To the researcher, this work will serve as an avenue to broaden my knowledge, as it places a challenge that will expand my intellectual horizon by adding and applying various economic tools analysis draw conclusion for future analysis. It is also expected to serve as an impetus for further researchers in this area of study. It should not be regarded as an end to research and policy making but as a guide taking into consideration of its limitation.

To the government and its agencies, it looks as earlier policies designed and why they failed. Therefore it is hoped that it will provide a useful guide to policy makers in agriculture for steady and consistent polices and programme in terms of funding.

To the society, this researcher’s work will create awareness of microfinance services and enables them engage in economic activities to be self-reliant, increase employment opportunities, wealth creation, growth and development. Finally, the salient findings of the study will also make the farmers to be more oriented in agriculture.

1.8 Limitations of the Study

There are certain limitations which are placed in the study. The research work was faced with a lot of problems amongst others are poor cooperation from some microfinance banks, constitute a serious delay in the release of data necessary for the work to be complete. There is also the problem of inadequate and accurate data for indept assessment of the subject matter.


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