Efficiency of Microfinance Banks’ Lending to Agriculture in Imo State, Nigeria

Abstract

The study analysed the efficiency of microfinance banks’ lending to agriculture in Imo state, Nigeria. It analysed the cost of loan recovery in relation to the total loan recovered. Purposive sampling technique was used in the study. A list of microfinance banks was collected from the Owerri office of central bank of Nigeria which had 43 microfinance banks in the state. This formed the sampling frame from which 26 microfinance banks were purposively selected. The purposive selection was based on the microfinance banks that had the highest number of agricultural loan beneficiaries. Data were analysed using descriptive statistics and efficiency of loan recovery model. The result revealed that the efficiency index of the microfinance banks ranged from 0 to 0.5 and a loan and a mean of 0.06. The result further showed that 96.1% of the banks were within the index of 0 and 0.2. This implies that for every one thousand naira recovered from beneficiaries of microfinance banks, they spent sixty naira from their interest in recovering the loan. The results further revealed that 61.54% of the banks use additional guarantors to recover their loans while unconventional methods of recovery such as the use of the police accounted for 38.46% of the recovery technique. It was therefore recommended and concluded that since these microfinance banks are efficient in their loan recovery, they should make micro loans available to potential borrowers who want to invest in agriculture.