Akwa Ibom State is located in the South Eastern part of the rain forest zone of Nigeria. The State lies between N 4.33 - 5.33 and E 7.25 8.25. It lies along the South Eastern coastal plains bordered by Cross River, Rivers, Abia and Ebonyi States. The State has an extensive shoreline 129kms in length long and surrounds the Qua Iboe River Basin and the eastern parts of both the lower Cross River Basin and the Estuary of the Imo River. Its climate is typically tropical, hot and humid (Akwa Ibom State Ministry of Economic Development, 2004).
Akwa Ibom State is made up of 31 Local Government Areas divided into the six Agricultural Zones of Uyo, Ikot Ekpene, Oron, Eket, Abak and Etinan. It is also densely populated with a population of about 3.9 million people (National Population Commission, 2006). According to the Akwa Ibom State Ministry of Economic Development (2004), the farm families are characterised by eight to ten members with 80% of the farmers owning their land. Furthermore, the average farm plot is below one hectare with many farmers still allowing short fallow periods. The main crops grown are cassava, oil palm, maize, plantain, cocoyam, okro, fluted pumpkin, water leaf, rice, rubber, and raffia palm.
Other crops grown in lesser quantities are mangoes, citrus, cocoa, kola and cowpeas. The State has a bimodal rainfall pattern with the rains lasting, on the average, for eight to nine months followed by a short dry season. The rains are heavy and begin March and end in November, peaking in July and September. The weather can also support appropriate crops all round the year (Akwa Ibom State Ministry of Economic Development, 2004). Most small scale farmers in the State depend on informal sources for finance and these sources range from local money lenders, neighbours, relatives, friends to rotating savings and credit associations (Udoh, 2005). A multistage sampling technique was used in this study. Two Agricultural Zones, Uyo and Abak were randomly selected from the six Agricultural Zones of the State. In the second stage, six Local Government Areas (Uruan, Ibesikpo, Uyo, Etim Ekpo, Abak, Ukanafun) were randomly selected from the two Agricultural Zones. In the third stage, one clan each was randomly selected from each of the six chosen Local Government Areas. These clans were Ibiaku Uruan, Ibesikpo Asutan, Uyo, Uruk Ata, Otoro, and Ikot Akpan.
One village each was then randomly selected from each of the clans selected in the last stage. The villages were Utit Uruan, Nung Udoe, Ikot Akpa Abia, Nkwot, Uruk Uso, and Idem. From each of the chosen six villages, a list of informal credit sources was obtained from the village secretaries who were the key informants. These formed the sampling frames from which samples of four respondents were randomly selected per village. In all a total of 24 informal lenders were randomly selected for detailed study. Another list of food crop farmer borrowers was obtained from the selected lenders from each village. These formed the sampling frame from which 16 borrowers were randomly selected from each village, making a total of 96 borrowers.
Data collection on some of the socio-economic characteristics of the respondents and their credit operations was based on the 2007 farm year. Primary data were collected from the chosen samples using structured questionnaires. Data analysis was by regression analyses. The simultaneous equation model was employed here and the estimation was done using two stage least squares. The implicit functional forms were specified thus (Gallagher, 2001; Katchova, 2005; Nwaru, 2004): CRD = f(EDU, FICt-1, HHS, INT, GEN, PRFt-1, FZE, Ui) CRS = f(LIQ, LEV, EIL, GEN, SUR, INT, Ui) (1) (2)
Where CRD is Credit Demand in (N) measured by the total amount the farmer asked for whether or not he was given. EDU is the educational level of the farmer measured by the total number of years the farmer spent in receiving formal education. FICt-1 is farm income (N) measured by the income of the farmers from farming in the previous year. HHS is household size, describing the number of people living with the farmer and whose responsibilities he bears. INT is interest amount (N) measured by the total amount the farmer paid as interest charges on money borrowed. Gen is gender of the farmer which was defined as unity for male farmers and zero otherwise. PRFt-1 is gross farm profit of the previous year (N). FZE is the farm size in hectares measured by the total land area under arable crop production.
CSS is Credit Supply (N) measured by the total amount of money the lender was willing to make available for borrowing. LIQ is the liquidity of the lender, measured by current asset/current liability of his farm business. LEV is the business leverage of the lender measured by current debt/owners equity. EIL is the experience in lending measured by the number of years the lender has been in the business of lending. SUR is provision of a surety or guarantor for loans (binary; unity if surety or guarantor was considered and zero otherwise). INT is interest amount (N) measured by the total amount the lender received as interest charges on money lent. Ui is the error term assumed to fulfill all the assumptions of the classical linear regression model. Equations (1) and (2) were subjected to simultaneous equation analysis. The identification conditions of the system of equations were considered. They were found to be over identified and therefore estimated by using the two-stage least squares method.