Agricultural Bank, Strategic Position for National Development

Agricultural Bank, Strategic Position for National Development

Agricultural Bank – The agricultural sector occupies a strategic position in the development of any nation via the presence of an Agric bank.

As such, the development of this sector becomes very important. In Nigeria today, there is a growing emphasis on the need for rapid development of the agricultural sector of the economy in order to break the vicious circle of poverty which is prevalent among the small scale farmers. In order for Nigeria to cut down its increasing food import bills, the only short-run option is to encourage smallholder farmers to improve and increase their food production.

Most of smallholder farmers are poor; therefore they need credit to help them improve their capital, output and income. Credit is regarded as a major factor in agricultural development and lack of it is usually given as an explanation for problems facing the agricultural sector in developing countries especially with the absence of an Agricultural bank.

Agricultural credit refers specifically to the process of obtaining control over the use of money, goods and services, in exchange for a promise to pay back at future date (Adeyeye and Dittoh,2005). According to Lee et al(2006),credit is important and necessary in nearly all commercial farm business.

It is a unique resource since it provided the opportunity for additional input and capital now and to pay the cost from future earnings.

So, the potential to improve farm should be of the exterminating factors in the decision of whether or not to use credit. Credit contributes to the improvement of net income in several ways such as to maintain an adequate farm size, increase efficiency and adjust to changing economic conditions.

There are many sources from which our small holder farmers get credit for their agricultural or farming business. They are grouped into “formal” and “informal” sources. They later (informal) comprises of all credit obtained through the following, social clubs, friends, family, etc. The formal or non-indigenous credit institution is foreign and their operations have recognized standard practice – Agricultural bank.

Agricultural bank includes: the bank, non-bank financial intermediaries and development banks like in agricultural bank.

Other agricultural bank are the cooperative society, supervised agricultural credit scheme of the ministry of agriculture etc.

Agricultural Bank Definition

The agricultural bank is a bank set up by the government to solve financial problems of smallholder farmers in Nigeria with the responsibility of providing credit to farmers.

For the fact that the agricultural bank and other sources of credit are existing, small holder farmers have been able to achieve the following: – farmers are now very efficient in the utilization of basic productive resources available to them.

The potentialities of land, capital, and water and management resource will soon be effectively utilized for optimum production. Nigerian farmers now make significant and important contribution to national products, but the second major achievement of farmers is that of raising productivity to a high significant percentage of potential output.

The farmers are the main producers of more than 88% of the food consumed in Nigeria with the exception of some products (Olayide, 2007 and David et al, 2008)

With Agricultural bank, farmers are now able to produce enough food in quantity and quality to feed the increasing population of the country. The aging farmers’ population, rising rural-urban rift, makes this achievement more difficult; declining farms and creating problems of agrarian revolution and farm modernization.

Having the knowledge that all the farmers are efficient in the use of basic production resources available to them despite the small nature of holding, enhancing his accessibility to agricultural bank source of credit will therefore, be of immense importance to him in further increasing and improving on his or her yield, through the adoption of new technology and livestock breeds.

Indigenous agricultural products are now very popular in other countries and all other parts of the world.

1.2 Problem Statement of Agricultural Bank

Farm credit is an important means of improving capital investment in the agricultural sector to fulfill its expected role (Chidubelu and Ezike 1995) it is important in easing seasonal fluctuations in rural household incomes, promoting commercialization of farm enterprises and breaking the vicious circle of poverty among rural farming populace.

According to Osakwe and Ojo (1980), farm credit according to CBN report (1981), the only way to develop agriculture to achieve the self-sufficiency in food production is to invest massively in the sector.

Government response to this situation led to the establishment of the Agricultural Banks (AB) and other formal institutions who disburse agricultural credit to small holders farmers but it seems that most of the loans disbursed to the farmers are not repaid as at when due.

It is on this that the study tends to evaluate the loan repayment performance of smallholders farmers under the scheme of Agricultural Bank with a view to finding a solution to them.

Therefore answers to these questions are relevant to this study. What are the socio-economic characteristics of the respondents? Do the socioeconomic characteristics of the famers affect their repayment ability? How much of the agricultural loan was disbursed to farmers within the year under review?

What percentage of the actual Agricultural Bank was disbursed for a given period (2000-2010) as at when due? Is there any significant difference between the amount disbursed and that repaid within the year under review?

Do farmers utilize the loan disbursed to them for the intended and stipulated purpose? What factors influences and contains farmer in the repayment of loan in the area?

1.3    Objectives of the Study
The broad objective of the study is to evaluate the loan repayment performance of farmers under the smallholder Agricultural scheme of the Agricultural Bank in Enugu State.

Specifically the objectives are to:-
i.    describe the socio-economic characteristics of farmers’ beneficiaries;
ii.    evaluate the amount of loan disbursed in relation to the amount repaid within 10 years (2000-2010);
iii.    determine the effects of socio-economic characteristics of the farmers on the amount of loan repaid;
iv.    analyze the factors that influence the repayment of agricultural loan by farmers in the study area; and
v.   identify the problems affecting the repayment capacities of the farmers.

1.4    Hypotheses
Two null hypotheses were tested. These include:
Ho1:    Socio-economic characteristics of the farmers have no significance effect on the amount of loan repaid.
Ho2:    There is no significant difference between the amount of loan borrowed and the amount repaid.

1.5    Justification for the Study
This study on Agricultural bank will be an immeasurable benefit to the continual efficient performance or contributions of the Agricultural Bank and most importantly to the smallholder
farmers.

This is because, the Agricultural Bank will be able to know and ascertain the period of loan recovery and the rate of loan default on the other hand, the small holder farmers will be in a position to estimate the amount of credit available for each period, it’s adequacy with a view for looking for other sources of fund for supplementary purpose.
It will also guide them on to tackle the various agricultural credit financing problems facing them. To the economy at large, this study will be good help since agricultural production has in the needs urgent attention it will help the federal and state government in formulating future agricultural credit policies.

LITERATURE REVIEW
In this chapter, the following areas were extensively reviewed. The definition of credit, roles of credit, historical background of credit in Nigeria, Agricultural lending, need for making micro credit available to rural farmers, sources of micro credit to rural farmers, role of micro credit delivery, sources of credit and lending security and  problems of credit institution in credit administration factors influencing farmers.

2.1    Definitions and Role of Credit
Credit in this study is the ability to borrow money. Borrowing money is the exchange of lenders money. There is no gainsaying the important roles of credit in the development of agriculture and the economy of Nigeria. It is a fact that credit and investment are important to the growth of
agriculture as it serves as a motivator to other factors of production (Ijere, 1998).

He further notes that credit is highly indispensable in the process of socio-economic transformation and in making the latent potential or underused capacities functional. Credit acts as a catalyst inherent potential and enable it to advance in the planned direction. He equally noted that credit contributor to economic development by enhancing productivity that provides higher income and better quality life of the farmers living in rural area.

He concluded that credit in the poor farmers hand would enable him to reap the economic or scale, discover new and cheaper product, create demand where none exists and provide utilities to satisfy the widening
market. Credit is therefore necessary as they cannot be viable agricultural sector without adequate financing.

Akpomedaye (1996) stated that an efficient credit system (Agricultural bank) is a precondition for the effective fulfillment of agricultural roles of:

1.    Generating internal capacity through saving
2.    Providing sufficient good of high quality for feeding the growing population.
3.    Providing surplus good and fiber for export in any given country
4.    Provide raw materials for home industries.

Credit is however a vital element in agricultural transformation without the farmers will hardly do any thing on the farm (Ijere, 1998) credit contributes to farmer social welfare, enhance production, and help in capital formation and continuity of income.

Farmers could meet up with their production and living expenses through credit during loan season when vesting or favorable price-period when the crops are sold (Oluoole, 1979). Ezike (1999) stated that amongst the numerous reasons for credit is the rapid shift from subsistence to market economy, which tends to increase the incentive to invest in agriculture.

Agricultural banks helps in the redistribution of income and expenditure and more efficient allocation of resources in any economy (Olayide, 1980 and Ezike 1999).

Agricultural Bank is an important factor that breaks the vicious circle of poverty, the greater the credit reduced inefficiency in resources utilization in production process and income the managerial skill of farms. Since the use of credit involves the increased use of resource inputs or new technologies (FAO, 1985).

According to Urama (1995), economic progress depends largely on increase of wealth through investment. Investments expenditures are important in fostering economic development and this is possible through increased capitals.

So far, different opinions on the importance of credit in agricultural development have been looked into as reported by several researchers. It is noteworthy that adequate and timely
credit is leverage for agricultural development. Therefore Agricultural bank can be said to be one of the pre-requisite for transforming and expanding agricultural production. It is however important to understand that the use of credit is crucial for a sustainable agricultural development.

2.2 Origin of Agricultural Bank
The Agricultural Bank was born following the failure and inadequacies of the credit institution such as Nigeria Development Board established in 1930 charge with the responsibility of paying adequate to farm credit. Others include Western Region Finance Co-operation (1955) responsible for industrial and agriculture credit co-operation (1962).

The fund for agricultural and industrial development for Eastern Region (1963), and Mid-Western Agricultural credit co-operation in (1964). Most agricultural credit in Northern Nigeria as at that
time were in form of government guaranteed overdraft of commercial banks but the operation of these institution were grossly disappointing and unsatisfactory due to the high incidence of default, lack of sufficient available staff, poor co-operation and above all, there were a lot of political influence in their activities. (Olomola, 1990).

As a result of these shortcomings a study was carried out in 1969 by World Bank at the request of the Federal Government. This resulted in the “Stoneham Report” which contained recommendation for the establishment of the Nigeria Agricultural Bank (NAB). The recommendation was accepted and included in the 1970-1974 national development for
implementation.

The Nigeria Agricultural Bank was registered as limited liability company in November 24th 1974 under the company‘s decree 1968 and was officially inaugurated on 6th March 1978.

The Federal Government also assumed in the course of implementation of the third national development plan (1975-1980) responsibility for the co-ordination of co-operatives exclusively within state government jurisdiction. A panel that was set up recommended that the bank be renamed (N.A.C.B) Nigeria Agricultural Co-operative Bank to reflect the emphasis laid by the government on cooperatives and the Bank was directed be responsible for financing viable co-operatives of various kinds in addition to its traditional function of agricultural bank.

As a result of this re-orientation, the federal government entrusted the supervision, control and
management of N.A.C.B to the co-operative division of the Federal Ministry of Trade by 1979 the paid up capital of the bank was increased to N150 million and the Central Bank of Nigeria subscribed 60% of the fund (Ijere 1986). The N.A.C.B was later renamed Agricultural Bank to portray the fact that the financial institution is also responsible for financing viable
co-operation project and rural development other than its traditional function of financing agriculture.

The agricultural bank serves the nation through a four-tiered structure. At the apex is the head office, there are five zonal offices namely, Abuja, Bauchi, Enugu, Funtua zones and other three hundred representative offices (Agricultural Bank guide 2005)

2.3    Sources of Micro-Credit to Rural Farmers

The sources of credit available to rural farmer in Nigeria are categories into two sources. According to Iganiga (2008), they are informal or traditional micro finance institutional source and formal or modern micro finance institutional sources.

2.3.1    The Informal or traditional institutional credit source

The informal credit or traditional institutional credit source are also called rural credit institution. This traditional micro finance institution provides access to credit for rural and urban, low income earners. They are mainly informal self help groups (SHG) or rotating saving and credit association (ROSCAs). Other providers of microfinance services include saving collectors and co-operative societies.

The informal finance institutions generally have limited outreach due primarily to paucity of loan able funds (Iganiga, 2008). According to Okpukpara (2009), the credit source for rural farmers are informal sources including credit from friends relatives, age grade, churches, unregistered cooperatives, “Isusu” etc. Loan from such source  are short term loan usually more direct to the borrower by the lender and are prevalent in area where individual are quite familiar with and share confidence in one other.

Abe (1981), contended that the relative ease of obtaining the loan is devoid of administrative delay, non-insistence by the lender on security or collaterals from the borrower and flexibility built into repayment programmes has made the non-institutional service popular among the peasant farmers who form the majority of their clientele. However, in order to enhance the flow of financial service to Nigerian’s rural farmers government has in the past initiated a series of public financed micro or rural credit programmes and policies targeted  at the disadvantages farmers. This lead to the establishment to the establishment of formal micro finance institutions.

2.3.2 Formal Source or Modern Institutional Credit Sources.
Formal sources or institution such as commercial and merchant banks, Government owned agricultural credit co-operation, Federal and State ministries of agricultural co-operation, River Basin and Rural development authorities (ADPs) and similar institution. This constitutes an important source of credit to medium and large scale farmers who are expected to be major producers of food and fibre in Nigeria in the medium and long term (Okorie, 1998).

Adera (1981), who maintained that apart from the access of the small scale farmers to formal agricultural credit, informal or traditional credit source are more important credit source to rural farmers. Loan among relatives and friends which are wide spread often with interest free but such loan usually involves small amounts.

The conditions of repayment are not often specified at all or are so imprecise that the line between the loan and gift is burred. Credit provided to farmers by professional money leader, merchant, traders, landlord, producers and buyers is of great economic important although is exploitative.

The traditional or informal institutional sources of agricultural credit are popular among small scale farmers because of simple procedure and time of loan. This informal or traditional institutional credit source is devoid of bureaucratic administrative which is the main feature of institutional or modern credit sources. This type of credit source institution hardly are adequate for large scale agricultural investment plans and cannot easily provide medium and long term loan for such plans.

Conclusively, the modern or formal institutional sources of credit that can adequately finance agriculture in the developing countries especially in the rural sectors are those financial institution which understand the farm development problems and potential needs of the rural farmers with an eager to assist in the solution of these financial problem because it affect their own real existence and growth as a business organization and the nation at large.

2.4    The Role of Micro-Credit and Agricultural Bank in Agricultural Development

The evolving role of credit in agricultural development and in strengthening the rural economy in a country cannot be overemphasized. It is not a surprise why credit and agricultural sector are closely tied to the (Todaro, 2006). Thus credit has the potential to create employment than traditional industrial development (Longhurt, 1991).

In a similar vein, credit and investment are important to the growth of agriculture as it serves as a motivator to other factors of production (Ijere, 1998). The above author further contended that credit is highly indispensable in the process of socio economic transformation and in making the latent potentials or under used capacities functional. Credit act as a  catalyst that activates economic growth and help to moblilize the economy’s inherent potentials and enable it advance in the planned direction.

Obiyan (2000), who conceived micro credit as a major input in production and that due to its significant and crucial characteristics, is usually treated as a separate entity from other inputs or production. He further argued that availability of credit help to increase production and productivity at farm level which may lead to higher income and consequently lead to enhanced standard of living of the rural populance.

However, Awora (2004), viewed credit as a viable tool in any economic development strategy. Similarly Ezike, Nwibo and Ngozi (2009), conceived credit facility as having the potential of contributing to the general economic development thereby increasing the output of rural populance and also ancillary occupations of rural sectors. The above authors further maintained that credit if utilized under proper conditions, may lead to increased productive power and provide the means for future economic growth.

Mbam (2009), in recognition of the importance and crucial role of credit agricultural and rural development cited Ijere (1998) who asserted that a country caught up with the difficulty situation of vicious cycle of poverty but acquires mainly an injection of capital (credit) to activate the system rather than other factors of production such as land, labour or management.

The above author further described credit as a necessary ingredient in the various aspect of farmers operation. Still on the above author who is of the opinion that an influx of credit is positively related to the rate of development which in turn enhance the productivity capacity of the rural populace. Arguing still, he further maintained that, it has been a rural problem of who will provide the credits-individuals or government. It is in view of the above, that it was observed, that the injection of reasonable amount of credit has been the responsibility of the government as the private sector are characterized with a low and slow profit orientated ventures that are associated with a lot of risks.

Finding from different scholars has it that most of the Nigerian farmers operate on subsistence level due to lack of funds and other factors of production (Nnadozie and Ibe, 2002).But then, the issues of who produce the credit does not account so as much as they are made accessible and available at an adequate and moderate interest rate and on the time too (Nwosu, 2000).

Accordingly Elizabeth (2004) also opined that access to credit facilty is a means to empower the poor and provides a valuable tool to assist the in economic development process. Yunus (2004), who was of the opinion that any credit invested in an income-generating enterprise (agriculture) as working a capital or for productive asset can leads to establishment of a new enterprise or the growth of an existing one. He further reiterated that profit from the enterprise provide income, and a genera; strengthening of income source of a developing economies. Thus, credit are made for housing and for start up a new enterprise and for purchase of agricultural input and also for rural development.

2.5    Rural Farmers and Micro-Credit Delivery in Nigeria
In developing countries, rural sectors account for a significant share of production and employment and are therefore directly influenced by lack of credit facility (Okpukpara, 2009). Thus, in Nigeria, the unemployment situation is worrisome. Recently, statistics has show that 70% of country employable population are rural  farmers and lack access to credit in order to exploit their potential, the majority of whom resides in rural areas notwithstanding leading to rural-urban drift (CBN, 2005 and Zhixiong, 2004).

Again about 90% of total enterprise are small scale farmers helping to alleviate poverty in different dimensions (Nmachi, 2007). Incidentally nearly 40% of population in rural sector cannot afford the minimum consumption for survival and lack access adequate credit that is adjudged to total declining in agricultural development especially in the rural areas (Gobezie, 2009).

Similarly, it has been deserved that rural farmer constitute about 70% of Nigeria total population residing in sector that are spread all the country’s landscape, there by making the rural area that provide bulk food for consumption and for export constituting part of the nation’s foreign exchange earning (Akpabio, 2005). However, the inability of this rural populace to provide enough output for a country has been identified as lack of basic infrastructure such as credit to the rural farmers at their farmers disposal (Rweyemamu et al 2003). Notable characteristics of these rural farmers includes low capacity to save, vicious cycle of low income, cultural barrier, high level of illiteracy and poverty.

In the same manner, the feature, the feature of rural farmers have been identified by quite number of scholars in the past. World Bank (2004), characterized rural or small scale farmers as a population that is been extremely poor and are particularly excellent borrowers Mohammed (1988), as was cited by Akpabio (2005), noted rural farmers as those who engage mostly in mixed cropping in order to enhance steady flow of income and prevent famine. Rural farmers are those population whose resource are too small to qualify for or may not have appropriate growth potential as a farmer (Donal, 2000)

According to Mondal (2009), rural farmers are characterized as the population of people in the region of the world where the number of the people living in abject poverty continues to grow. Ijere (1988), In his own view sees rural farmers or rural areas as a people of low status in the economic main streams and detached with the problems to productivity.

Moreover, small scale farmer account for about 90% total food and fabric production in most developing countries especially Nigeria. Thus, this she or he achieved through the provision of purchasing power (credit) within their reach at their own disposal with the help of children. His overall agricultural “Machinery” fir tillage constitute hoe in its various forms, shape and size inherited from their forefathers.

Rural farmers have been identified as the target of an optimal agricultural transformation strategy (Idabacha, 1988). According to the author above, rural farmers produce about 95% of the total market supplied of food and fibre.

However, the challenges for agricultural development institution and absence of agricultural bank should be geared toward the provision of adequate credit to assist farmers in increasing the productivity. It is believed that without credit facility, the much needed rapid agricultural development and transformation of traditional subsistence farming system to a profit oriented family, family activities will be hampered and can lead to low economic development.

Thus, the need for providing agricultural credit in the rural sector is universal since credit is one of the first demands of every farmer.

Hornlund, (1994) maintained that national and rural development cannot be successfully actualized without involving rural farmers (men and women). This is because half of the World stock of intelligence is men and women and that half of the world human resources are embodied by rural dwellers. Therefore, the role of rural farmers in agriculture cannot be under estimated. Rural farmers are major contributor of African agriculture and that they make up of 60% workforce in the informal sector and are made of about 70% of agricultural procedures of farm labourers.

Again, rural farmers form the back bone of the achievement of agricultural production (food production) which is central to successful national and agricultural development (Odii, 1996, Ochai and Obinne, 1991).

In view of the above significant role played by the rural sector in food and fibre production but then, the issues is that, these advantages over rural farmers. The major instrument is still agricultural improvement aimed at increasing yield per unit area of land through the distribution of improved input such a s high yielding seedling, machinery, credit etc. thus, the relative merit of rural farmer have been argued for more than century (Berry and Cline 1979).

The question as to the best unit of agriculture management has been of increasing importance and this question is closely interwoven with the problem of income in agricultural and in adequate income.

Again, agriculture in Nigeria and in most other developing countries are dominated by rural farmers. Several constraints which appear in surmounting limits the overall farming activities and if this is anything to go by, the destiny of a developing economy heavily rest on the shoulders of small producers policies affecting number and size of farm which have social political policies as well as economic implication for developing countries of which Nigeria is one (Oladeebo, 1994)

However in this study, the concept of rural micro credit delivery according to Adebayo (2008) who cited Ditto and Adegeye (1985) defined rural micro credit delivery as the process of obtaining control over the use of money, goods and services in the present in exchange for a promise to pay at a future date. The crucial role of credit in agricultural production and development can also be appraised from the lack of it.

The above author further stated that agricultural credit to rural farmers enhance productivity and promotes standard of living by breaking vicious cycle of poverty of small scale farmers. He also claimed that in modern farming business in Nigeria, and that provision of rural credit is not enough but efficient use of such credit has become an important factor in order to increase productivity. Credit to rural farmers is not only need for farming purpose, but also for family and consumption expenses especially during the off season period. World Bank (2003) noted credit to rural farmers as an effective way to help them build income and manage risk and also work their way out of poverty.

2.6    Agricultural bank and Lending

Types of Formal Agricultural Lending
a)    Subsidizing Lending
Subsidizing lending in many countries is affected through their agricultural development banks. It is a credit situation in which government subsidized interest rate of agricultural credit. It is argued that since it is usually based on credit worthiness it reduces determination of large farmers to use credit productivity due to the fact that it cheap.
When credit is subsidized, interest rates do not influence the use of formal credit (upton 1996 Balogun and out 1991).

Penny (1986), in criticizing subsidized farm credit policies of government argued that most farmers do not have to be bribed by cheap credit to adopt profitable innovation, if there are satisfactory markets for their output. He opined that what we should do is to ensure that farmers receive good price for their products, provide necessary infrastructure facilities, make necessary input available at the right time and remove distortion in exchange rate.

b)    Market Agency Lending
This is a lending situation in which marketing board or agencies short-time loan to farmers at the state of the cropping season with a contractual arrangement that farmers should sell their product to the agency after harvest. Repayment of the loan is deducted from the value of the crop sold to the agency. The system is home what inflexible and involves strict control of the marketing operation (Upton 1996).

c)    Group Lending.
According to Agu (1996) the idea of group loan is that a group of farmers unit joint borrowing and be responsible as a group for effective use and timely repayment. Abu, Ejembi and Okpah (2006) in their study on financial market of small farmers for agricultural technology adoption used descriptive statistics to show that 70% of farmer’s credit came from the co-operative group who further lend to it on their members. Group loan have some advantage over individuals loan because there is less of default since the group take joint responsibility for the repayment and have co-operation in raising loan (Upton 1996).

Igben, Eyo and Anyanwu (2002) in their study on motivation and non financial section among informal group in Imo State using descriptive statistics showed that the combination of section and motivation strategies which included sharing group profit at the end of the year denying defaulters their share of profit and other privileges and ensuring that b beneficiaries obtained new loan each time loans are repaid greatly improve level of loan recovery in the group lending scheme.

d)    Integrated lending
This is the process of linking credit to farmers with integrated rural development. The main advantage of linking credit with integrated rural development is that opportunities for profitable investments are presented along with the system assists farmers in drawing up plans and making application for credit. Agricultural extension agents are also involved in the supervision of the used and repayment of the loan granted to farmers (Upton 1996).

e)    Lending Security
Security requirements for borrowing from Agricultural Bank

1.    Loan volume between N1 to 25,000 guarantors is acceptable.

2.    Loan volumes between N25,000 and N250,000

Security requirement is 60% outside the project land provided the development of the project land is not more than 4% of loan volume, plus no legal charge on the project land and all
development thereon, whereby Agricultural Bank fund or by client contribution. This rule is subject to provision that were the mortgage value of structure on the project. Land is above
40% the security requirement outside the project land will be reduced above 40%.

3.    Loan volumes between N25, 000 to N1 million.

The security requirement is 80% outside the project land provided.

The development on the project land is not more than 20% of loan volume plus legal charge on the project land and all development thereon whether by Agricultural Bank fund or
client’s contribution.

4.    For loans above N1million. The security requirement is
100% such security may include a legal charge on the
project land and development thereon whether by Agricultural
Bank fund or client’s contribution.

5.    For tractor hire services, 100%

6.    Where a project has no certificate of occupancy. The security required outside the project is 100% cover (Agricultural Bank manual 2005).

Conditions for Borrowing from Agricultural bank

The condition for borrowing for individual and co-
operative bodies at the agricultural bank are:
1.    Viability of project
2.    States of applicant
3.    No proxy
4.    Borrowing powers and ability to repay loan
5.    Availability of land
6.    Security required are legal mortgage of project land, real property, endowment insurance policies etc are accepted to Agricultural Bank (Agricultural Bank manual 2005).

2.7    The Need for Agricultural Credit to Small-Scale Farmers

Despite the possible high ratings of savings achieved by some farmers, there is little doubt that credit can improve the productivity, incomes and welfare of rural occupants. Short-term credit may alleviate seasonal needs for working capital, or the problems arising from crop failure and unexpected social commitments. Note that credit may be used for production or consumption and some argue that it should be restricted to the former use (production) Lee (1972).

However, the distinction is really very hard to draw since funds are “fungible” which means that they can be moved around between users. Credit provided for productive purpose may supply allow the family to spend more of their own savings or equity on consumption. However, savings which are already invested in the farm or in non-agricultural activities are no longer fungible.

A household with saving tied up goals cannot immediately release these funds to buy sheep if the
latter prove more profitable, since practically all technological innovations are embodied in ne forms of capital, liquid funds will facilitate and accelerate the necessary investments and hence the adoption of the technology. However, in the absence of any new technology, provision of credit along may have little Oboh (1981), Osuntogun (1981)

2.8    Problems of Credit Institution in Credit Administration in Nigeria.
Small-scale farmers need more services and closer supervision than more commercialized larger farms and less rigid polices on collateral despite and repayment timing. There are many problems in granting credit to small-scale farmers, the small loan and the spread of borrowers over vast have made smallholder credit more costly. The high cost of extending smallholder credit to individual also arises because administration costs-investigation, office needs servicing and collections are similar whether the loan is large or small (Njoku 1993).

Formal financial institution meant for rural people were into designed as credit and non-saving institution intended to enjoy government sponsorship in perpetuity while operating outside market forces.

As a result, loan are disbursed at interest rates below the market rate while cost of loan administration escalates in order to realize suit able profit margins therefore, such development banks tend to minimize their fixed costs by selecting large scale producers while the small holder, who constitute the majority and already face considerable problem in securing production credit are marginalized.

3.1    Conclusion
The result of the study showed that formal micro credit delivery is needed to improve the productive capacities of the small holder farmers in the study area have.

If properly managed and also evenly and directly and timely disbursed has great potential of increasing the productivity of agriculture in the area.

AGRICULTURAL BANK, STRATEGIC POSITION FOR NATIONAL DEVELOPMENT