Determinants of Agro-Dealers’ Participation in the Loan Market in Nigeria
International Food and Agribusiness Management Review Volume 17 Issue 3, 2014
Posted: 19 Apr 2016
Date Written: June 1, 2014
Agro-dealership financing deserves policy attention if agro-dealers are to contribute to the success of the ongoing agricultural transformation in Nigeria. Thus, this study seeks to (i) examine the issues influencing the decisions of agro-dealers to participate in the loan market, (ii) analyze the demand for business loan by the agro-dealers and (iii) articulate policy measures for sustainable financing of agro-input business enterprises in Nigeria. The study employed primary data collected through structured questionnaires from 300 agro-dealers and used a Tobit type-II model for the analysis. The results show that interest rate, debt, value of asset, membership of trading association and source of credit are major determinants of loan demand. Agro-dealers need to organize themselves into input trading associations to enhance their creditworthiness and unleash the inherent social capital and information advantages for improved agro-dealership financing. Moreover, diversification of product coverage by agro-dealers and a value-chain approach that links internal financing in the form of trade credit within the agro-input sector with external financing from the commercial banks are strongly recommended.
Keywords: agro-dealers, business loan, demand, policy, Nigeria
JEL Classification: Q13, Q14, Q18, G21, G23
Suggested Citation: Suggested Citation