CREDIT ACCESS AND THE PERFORMANCE OF SMALL SCALE AGROBASED ENTERPRISES IN THE NIGER DELTA REGION OF NIGERIA

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CREDIT ACCESS AND THE PERFORMANCE OF SMALL SCALE AGROBASED ENTERPRISES IN THE NIGER DELTA REGION OF NIGERIA

ABSTRACT

The study was designed to analyze credit access and performance of small scale agrobased

enterprises in the Niger Delta region of Nigeria. A multi-stage sampling technique

was adopted in selecting 264 and 96 agro-based enterprises that accessed informal and

formal credit respectively, through the use of structured questionnaire and oral interview.

A total of 360 respondents were selected and used for the study. Socio-economic

characteristics of the enterprises were described using descriptive statistical tools such as

percentages, means and frequencies. The logit model was used to examine enterprise

characteristics that had significant influence on informal and formal credit access by

small scale agro-based enterprises. The Heckman model was used to examine the factors

affecting informal and formal credit amount accessed. The Poisson regression model was

employed to examine the factors affecting frequency of informal or formal credit access

by the enterprises. Current ratio and return on capital were employed to examine the

performance of enterprises that borrowed from informal and formal credit markets in the

area. Separate treatment of Informal and Formal Credit served to identify the similarities

and differences between the credit source concerning the determinants of credit access,

amount of credit accessed, frequency of access, credit default and financial performance

of the enterprises. The results showed that 60.13% of small scale agro-based enterprises

had access to the informal credit market, whereas only 21.86% had access to formal

credit market. Enterprise age (p<0.10) and social capital (p<0.01) had significant and

positive influences on informal credit access, while gender (p<0.01) had a negative

influence on informal credit access. Formal credit access was positively influenced by

enterprise age (p<0.05), enterprise size (p<0.05), collateral (p<0.05) and education

(p<0.10).

Informal credit amount received was positively influenced by enterprise size

(p<0.10), guarantor (p<0.05) and social capital (p<0.01), and negatively influenced by

gender (p<0.05) and income of enterprise (0<0.01). Formal credit amount received was

positively influenced by age of enterprise (p<0.10), size of enterprise (p<0.05), collateral

(p<0.01) and social capital (p<0.05). However, influence on income of enterprise

(p<0.01) had a negative effect. Frequency of informal credit access had a significant

positive influence on experience in borrowing (p<0.01) and social capital (p<0.01), while

it had a significant negative influence on income of enterprise (p<0.01) and non-agrobased

income (p<0.01). Frequency of formal credit access was positively influenced by

education (p<0.10) and collateral (p<0.01), and negatively influenced by interest amount

(p<0.01) and non-agro-based income (p<0.01). Furthermore, income of enterprise

(p<0.01) had a significant positive effect on informal credit default, whereas, gross profit

margin (p<0.01), interest amount (p<0.05) and shock (p<0.01) had a significant negative

effect on informal credit default. Also, formal credit default was negatively influenced by

gender (p<0.01), education (p<0.05), gross profit margin (p<0.01) and shock (p<0.05).

There was a significant difference between mean return on capital employed by

enterprises that borrowed from formal and informal credit institutions, hence their

performances varied. It was recommended that Government and development partners

in the region should realize these changing realities and designed appropriate credit

packagesfor the enterprises in the region. This will go a long way in complementing the

amnesty programme of the Federal Government of Nigeria in the region.

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