Efficiency of Cooperative Societies in Credit Delivery to Agricultural Enterprises in Yakurr Local Government Area, Cross River State, Nigeria

In developing countries like Nigeria, agriculture dominates the economy. It has been established that about 70% of Nigeria population is engaged in agriculture while 90% of Nigeria total food production comes from small farms and 60% of the country population earn their living from these small farms. (Alufohai, 2009; Awotide, Aihonsu and Adekoya, 2011 and Ajah, Itam and Asuquo 2014). The fall in agricultural production could be attributed to inadequate infrastructure, under mechanization and inadequate finance (Oluwatayo, Sekumede and Adesoji, 2008). One of the major problems of agricultural development in Nigeria is that of developing appropriate organizational and institutional framework to mobilize and induce members of the rural sector to a greater productivity effort (International Cooperative Alliance, 2010). As such rural farmers who are characterized by low income, low resources utilization, small farm holdings and scattered nature of farmland, finds it difficult to pool their resources together in order to raise their farm income and substantially improve their living conditions (Ibitoye, 2012).

Inadequate finance has remained the most limiting problem of agricultural production. This is because capital is the most important input in agricultural production and its availability has remain a major problem to small scale farmers who account for the bulk of agricultural produce of the nation and credit has been identified as a major factor in the development of agricultural sector (Ndifon.,Agube and Odok, 2012). Credit is considered as a catalyst that activates other factors of production and makes under-used capacities functional for increased production (Ijere 2008).

Ijaiya and Bello (2009), define credit as financial resources obtained at certain period of time with an obligation to repay at a subsequent period in accordance with the terms and conditions of the credit obtained. Credit could come from banks, government cooperatives or individuals. Agricultural credits on the other hand are loans extended to farmers for production, storage, processing and marketing of farm products. When farmers face credit constraint, additional credit supply can raise input use, investment and hence output, these they refer to as liquidity. Better agricultural credit facilities can help farmers smooth out consumption and therefore, increase the willingness of risk adverse farmers to take risks as consumption smoothing effect. Hence abetter agricultural credit may lead to a higher volume of food output if the increased credit is used to increase fertilizer, private investment in machines and food crops (Edordu, 2010).

Agricultural credit could be obtained from either the formal sources which are the commercial banks and government owned institutions, or the informal sources which are the self-help-group (SHG), money lenders, cooperatives and Non – Governmental Organizations (NGO‟S)(International Cooperative Alliance 2005). However, informal source of credit is more popular among small scale farmers which may be due to the relative ease in obtaining credit devoid of administrative delay, non-existence of security or collateral, flexibility built into repayment which is against what is obtained in the formal source. Also, Izekor and Alufohai (2010), noted that informal rural financial sources in Africa perform better than the formal system because the institutional lending system has failed to meet the objectives for which they were set up. The situation has attracted the attention of Nigeria Government and this had led to the creation of specialized institutions such as Nigeria Agricultural and Cooperative Bank (NACB) which later transformed into the Nigeria Agricultural Cooperative and Rural Development Bank (N.A.C.R.D.B) to cater for the credit need in the agricultural sector. However, Alufohai and Ahmadu (2005) studied its queue management and reported its ineffectiveness in credit delivery.

Following from the above, the small scale farmers are forced to source for capital from relations, moneylenders and group contribution. All of these are known to be ineffective in providing capital for substantial increase in agricultural production. The last hope for the small scale farmers then lies with the cooperative societies. The cooperative societies have been identified as better channel of credit delivery to farmers in terms of its ability to sustain the loan delivery function (Nweze, 2003). International Cooperative Alliance (1995) defines cooperative society as an autonomous association of persons who unite voluntarily to meet their common economic, social, and cultural aspirations through jointly-owned and democratically controlled enterprises. Cooperatives are established by likeminded persons to pursue mutually beneficial economic interest. They provide services like provision of farm inputs, farm implements, farm mechanization, agricultural loan, and agricultural extension, member‟seducation, marketing of members‟ farm produce and other economic activities and services. However, regular and optimal performance of these roles is crucial in order to accelerate the transformation of agricultural and rural economic development.

Cooperative societies are formed with the idea of mutual cooperation. Every cooperative society is formed to render services to its members rather than earn profit. In Nigeria, savings of members are usually very small due to low income status of the population (Yusuf and Iyaiya 2009) and as such majority of the cooperatives do not have enough fund to give out as loan to their members. Some give less than what members request for which may not be sufficient for the project members intend to utilize the loans on. Badiru(2010) identified lack of adequate funding of cooperatives as one of the inhabiting factor or the inability of most poverty alleviation strategies to yield result. Agbo (2009) discovered that poor cooperative education and illiteracy has been one of the greatest hindrances to growth of cooperatives. Adeyemo and Bemire (2005), also found out that education, training and re-training of cooperative members in general and officers in particular have been problems of cooperatives in Nigeria (Dogarawa 2005). Agbetunde (2007) stated that cooperative awareness is high in Nigeria but knowledge of the cooperative principle values, ideas and practices is very low. As such issues are handled as they come without proper knowledge and skills necessary to handle them. Infact some of them lack appropriate documentation, which continues to breed corruption within the organization.

The perceived benefits and problems of cooperative societies in the financial sector is worthy of exploration. Studies carried out by Izekor and Alufohai, (2010) and Ajah et al. (2014) on the effectiveness of cooperatives societies in agricultural credit delivery in IkpobaOkha Local Government Area, Edo and Cross River State respectively have shown that cooperative carryout the function of credit delivery to farmers but there is ample evidence that farmers still face difficulties in obtaining credit. More so the problem of sourcing for capital by agricultural enterprises still lingers. This may be unconnected to cooperative societies efficiency in credit delivery. It is against this backdrop that this study is designed.