Default Risk and Determinants of Farmers’ Access to Micro-credit from Cooperative Societies in Abia State, Nigeria

Abstract

This study on default risk and determinants of farmers’ access to micro-credit from cooperative societies was carried out in Abia state, Nigeria. Longitudinal data on micro-credit seeking and repayments for ninety (90) rural farm households in three agricultural zones of the state were collected for 2011 and 2012 farming seasons. The cooperatives and farm households were chosen following stratified random sampling technique. Data gathered through a survey were analyzed descriptively and by inferential statistics using probit regression technique. Results indicated 57 of the 90 farm households involved in this study received a total of N2, 947,140.00 from their cooperative societies and repaid N2, 210,230.00 within a required 24 months. The overall repayment performance of 74.99% was thus very good compared to the 25.01% default rate. The number of years of farming, taking farming as major occupation, years of farmers’ membership to cooperative society and farmer’s deposit/savings in the cooperative society were factors that positively and very significantly (P=0.01) influenced access to loans in the cooperative societies. Another factor that positively but moderately (P=0.5) influenced access to cooperative loans was members demanding for credit after being denied loan(s) from formal sources (spillover demand). The only negatively significant factor that moderately influenced access to cooperative loans was default in repaying previous credit. These factors emphasized that devout commitment to ideals of cooperative movement assures members access to available loans in cooperative societies. Cooperators who benefit from union loans should learn to repay within reasonable agreed period of use of the loan to avoid being in default of repayment and guarantee getting new loans on future requests. They should invest loans in quick yielding enterprises and engage in viable off-farm jobs to earn extra incomes that enhance their cash flows.