Credit Utilization Patterns among Smallholder Farmers in Ondo State, Nigeria

Abstract

This study investigated the utilization patterns of agricultural credit among smallholder farmers in Ondo State, Nigeria. Primary data were collected using a structured questionnaire administered to selected farmers across major agricultural communities using a multistage sampling technique. At the final stage, a formula was used to determine the appropriate sample size from the sampling frame obtained from the Ondo State Agricultural Development Project (ADP). Weighted mean, percentages, frequency count and standard deviation were employed to analyze credit use patterns and their influencing factors. Findings revealed that credit utilization was largely directed toward short-term operational and welfare needs rather than long-term productive investment. All the farmers who accessed credit applied a portion of the borrowed funds for the purchase of farm inputs, such as seeds, fertilizers, and pesticides \(\bar{X}\)= 3.36), 82.5% of the farmers utilized their funds for labour hiring \(\bar{X}\)= 3.24). Other areas with significant proportions were for educational, healthcare, and family upkeep purposes with farmers committing 97.6%, 95.8% and 86.7% respectively to credit utilization. This underscores its dual function in sustaining both production and household welfare. Conversely, minimal allocation to farm expansion (65.5%), cultural practices (42.6%), and machinery acquisition (15.9%) indicated limited reinvestment capacity and persistent structural constraints, including small loan sizes and inadequate financial literacy. The study concludes that improving credit effectiveness among smallholder farmers requires policies that enhance loan accessibility, strengthen financial management capacity, and link credit with input and market support to foster sustainable agricultural growth.