The vicious circle of poverty starts from the premise that in less developed countries, outputs are low due to deficiency of capital, market imperfection, and economic backwardness and under development. The aim of this study is to break the vicious circle of poverty and ensure that farmers in Okitipupa local government have access in obtaining loan from financial institutions. The methodology used in this study was primary data and the primary data was collected using well structure questionnaire. The local government area has a large population most of which are predominantly engaged in agriculture. Some farmers operate on large scale but the majorities are small scale. From this research work, one can say that the major problems facing the farmers in the utilization of credit to increase their production is high interest rate, inadequate loan provided, lack of collateral required etc. it is therefore evidence that the reduction in the interest rate, timely provision of credit, subsidization of farm inputs, provision of more formal financial institutions in rural areas will go a long way in solving the problem of vicious circle of poverty  among traditional farmers in Okitipupa local government area of Ondo State.    


Title page


Approval Page




Table of Contents


Background to the Study

Statement of the Problem

Objective of the Study

Research Questions

Research Hypothesis

Scope of the Study

Significant of the Study

Definition of Terms




Concept of Credit

Role of Credit in Small Scale Farming

The Demand for and Supply of Credit in the Agricultural Sector

The Role of Commercial Bank in Agricultural Financing

The impact of the Merchant Banks on Agriculture

The Role of Nigerian Agricultural and Cooperative Bank Limited on Agricultural Production

Agricultural Credit Guarantee Scheme Fund

Nigeria Agriculture Insurance Company and its Role on Agriculture

Role of other Non- Formal Financial Institution like Friends, Relative, Money Lenders on Agricultural Finance.                                            26-27



Research Design

Population of the Study

Sample and Sampling Technique

Research Instrument

Validity of Research Instrument

Reliability of Research Instrument

Method of Data Collection

Data Analysis


Result Presentation

Discussion of Findings





Suggestion for Further Studies






Background of the Study

The vicious circle of poverty starts from the premise that in the less developed countries. Outputs are low due to deficiency of capital, market imperfection, economic backwardness and underdevelopment. Low output will lead to low income. If income is low, consumption and savings will be low. Low saving means low capital formation and low investment. Poverty and underdevelopment of the economy are synonymous. A country is poor because it is under developed, but at the same time a country is underdeveloped and poor because it does not have a resource for promoting development.

To achieve the above fact, government of Nigeria and many other countries of West Africa must recognize the roles which credit can play in agricultural production and to establish a number of financial institutions and special agencies to provide agricultural credit to farmers. Apart from formal financial institutions, the informal financial institutions such as merchant, traders, friend and relative have helped in no small measure to finance agricultural production.

Small production farmers are poor because they cultivate on very small areas of land from which their output is very low and hence sell only a very small amount which in turn helps in expanding the farm or acquiring new technology. Agricultural credit to small production farmers can help in breaking the vicious circle of poverty.

It must be noted that agricultural credit is very much in short supply despite the various government measures to get more credit directed to the sector. farmers in general and small holders in particular are not in favorable position to obtain loans from credit institutions as they are reluctant to advance credit to farmers because of the fear of indebtedness, especially since farmers cannot always provide acceptable collateral security.

Statement of the Problem

Nigeria is a nation composed of small scale farmers. This is because when it is realized that small production farmers accounted for about 95% of the output of most crop grown in Nigeria, while at least 65% of the country’s population earn their living from this farming system (Olayemi, 1980). He also classified small production farmers as those having the size of farm ranging from 1-10 arches.

It could be noted that small scale farmers are efficient in the allocation of resources within their disposer but lack proper purchasing power.

As part of government policies, the CBN sometimes mandate the other banks to give substantial percentage of their loans to the farmers. Likewise, the informal financial institutions also give loans to the needy farmers to boost their production.

It is against this background that this study analyses the impact of financial institutions both formal and informal of funds from lenders to borrowers on the productivity of farmers in Okitipupa local government area of Ondo State.

Objective of the Study

The main objective of the study is to examine the impact of financial institutions on agricultural production in Okitipupa local government area of Ondo state. While the specific objectives include the following:

  1. To identify the major sources of credits to the farmers in the study area.
  2. To identify the credit demand by farmers in the study area.
  3. To determine the influence of credit on productivity of farmers.
  4. To determine the effect of credit utilization on the farmers output.
  5. To give recommendations on way of increasing the farmers productivity.

Research Questions

The research questions seek to guide the achievement of the aim of this study are;

  1. Do you think a financial institution such as the NACRDB is important to Agricultural development in Nigeria?
  2. Do farmers obtain loans from financial institutions such as NACRDB?
  3. Has government measures to boost agricultural production such as the establishment of NACRDB been effective in improving the performance of the Agricultural sector?
  4. Do you agree that the non-availability of loans to farmers causes decline in Agricultural production in the country?
  5. Can Agricultural production be controlled through effective bank credit?

Research  Hypothesis

In the process of carrying out of this research, two null hypothesis are to be tested at P=0.05 level of significant.

  1. H1 There is a significant relationship between the level of productivity of the farmers and the availability of credit facilities to the farmers in Okitipupa local government area of Ondo state.
  2. H1The informal financial institution has significant impact on the productivity of the farmers in Okitipupa local government area of Ondo State.

Scope of the Study

This research work could be subjected to the following foreseen limitations. Especially in other to get data for this work, I encounter the following limitations.

  1. Very many of the farmers in Okitipupa local government area of Ondo State are likely to be illiterates. Consequently, the researcher may need to fill the questionnaires he wants to administer himself after the farmers might have supplied answered.
  2. Some of the farmers in the study area are likely to be unreached because of the remoteness of their farms and lack of accessible roads.
  3. Illiterate farmers could be sometimes are secretive about their income because of the fear of payment of taxes
  4. Some of the farmers may not keep proper records of their farm activities and consequently may be inaccurate in their answer to the questionnaires.

Significance of the Study

The study is of great importance, considering the place of agriculture in an agrarian country like Nigeria. It is discovered that very many of the farmers in Okitipupa local government area practice subsistence agriculture. The level of poverty of the farmers is responsible for this.

It is strongly believed that this research work will bring solution to the problems of agricultural production in Okitipupa local government area. Thereby bring an end to inadequate credit facilities. The available credit facilities will bring about increase in the income of peasant farmers. The increased income so generated would provide means for them to purchase other necessities of life, which they cannot produce for themselves. By this, the standard of living of the peasants will increase.

The economic aspect of the importance of this study can be looked at in its capacity to reduce unemployment and under unemployment. Also there will be an increase in gross domestic product (GDP) since a large proportion of the population depends on agriculture. Also, the study can bring increase in the production of export crops. This is capable of ensuring enough foreign exchange.

Indeed, this research work is of great value because of its numerous usefulness to farmers in Okitipupa local government of Ondo state. e.g when farmers are finance it helps to increase their productivity.

Definition of Terms

Financial institutions: These are institutions which serve the purpose of channeling funds from depositors to borrowers. They hold money balance or borrow from individuals and other institutions in order to make loan or investment.

Agricultural credit: this is the amount of investment funds made available for agricultural production from resource outside the farm sector.

Agricultural productivity: It refers to the rate at which the farmers produce farm product and the amount produced compared with how much time, work, inputs and money that is needed to produce them.

Demand for agricultural credit: This implies the rate at which farmers seek to obtain loan or acquire credit. It could be potential of effective demand for credit. Potential means those that need credit while effective demand refers to the actual people that really obtain credit.

Supply of agricultural credit: This implies the various sources from which credit could be obtained; it could be organized sector or unorganized sectors.







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