In two decades, it has been a set back for farmers to increase their crop production due to lack of funds. At that time, farming was regarded as job for illiterate people and as such very few people were engaged in farming activities. This issue attracted attention of both state and the federal government to formulate policies and programmes to address the problems of farmers. The agricultural credit guarantee scheme fund (AC GSF) was established by Decree 20 of 1999 with ownership and shareholding of 60% and 40% in the favour of the federal ministry of finance incorporated and the central bank of Nigeria respectively. Also in the year 1984, Nigeria agricultural and co- operative bank was launched to finance rural farmers.  The mandate of Nigeria Agricultural and co- operative bank (N A C B) was to grant spot loans to farmers to increase their crop production for the teaming population and for export.

            There are other policy programmes of the federal government on agriculture which were linked up with commercial banks for the purpose of encouraging the farmers to produce more food such as National food security programme, special programme on food security programme and fadama iii project which are introduced to diversity agricultural products into other uses. All the above efforts by both federal and state government were geared towards impacting positively on the lives of rural farmers.
            The farmers through the assistance of commercial bank were able to feed their families building better houses and training their children in schools. Infact, farming activities now are regarded as lucrative business venture because of finance assistance from government through commercial bank in Abakaliki in particular and Ebonyi state in general. Unfortunately, farmers especially the illiterate ones fid it very difficult in obtaining loan from these commercial banks. This is because of vigorous nature involved such as having collaterals, surety, and bottle neck services. At time the loans may not be given on time when they are needed. The banks on other hands entertain fear that the money may diverted to another area other than the farming activities. This is so, because some farmers increase the number of their wives instead of investing the money on farming business. Also the issue of pest attack, theft and natural disaster like drought and flooding made it very hand before the bank grant loans to farmers. Although, the farmers were encouraged to insure their farms in the insurance company. This will enable them to recover the loses during this natural disaster through Nigeria Agricultural insurance company (N A I C).

            Historical and cotemporary experience has shown that no country can attain any meaningful development with out development in the agricultural sector (Myradal, economy, 20)the place agricultural in Abakaliki of Ebonyi state economy has remained critical over the decades since her creation. Prion to the political crisis, agricultures positive contribution to the sustaining economic growth and stability. These indications were clearly evident from- increasing food supply short falls, rising prices and deceiving foreign exchange earnings from agricultural exports.
            Against this back ground the following problem are identified as the causat factors of the slow progress unit nessed in agricultural finance by bank and the development of the agricultural sector in Abakaliki local government Area of Ebonyi state.
*          inadequate credit facilities to have appreciable impact on the growth of the sector
*          Lack of management skills and trained man- power in agricultural sector in Abakaliki Local Government Area.
*          Dominance of the sector by the poor peasant and subsistent farmers in the sector.
*          Inconsistency of government agricultural policies.

1.         To assess the extent to which commercial banks loans contribute to agricultural out put in Abakaliki local Government Area of Ebonyi state and over all economic growth.
2.         To assess the rate of growth of commercial banks loan to agriculture in Abakaliki local government area.
3.         to identify the problems of the commercial bank not granting loans to the farmers.
4.         expose the roles of commercial bank in the agricultural sector.
5.         suggest ways of improving credit delivery to farmer by commercial bank.

Ø         Ho; a1 = 0 commercial bank loan has no significant impact on agricultural out put in Abakaliki local government area in Ebonyi state.
Ø         H1 : A0 = 0, commercial banks loan to agricultural has a significant impact on agricultural out put in Abakaliki local government area in Ebonyi state.

            The findings or out come of  this study would be of great importance, serving as an eye opener policy market that under capitalization of the sector will breed under utilization of resources and hence low productivity.
            Those that stand to gain from this project include farmers, researchers, bankers, government and investors. The farmers will benefit from this work because it will verify the problems hindering the commercial banks from granting loans to them and also recommends to it. The researchers, government and investors are not left out. They will also benefit because it will find the cause of inadequate bank loans to farmers and solution to their problems 

The study will restricted to Abakaliki local government area in Ebonyi state particular reference would be given or devoted to commercial banks lending policy as it concerns on the period between 2010- 2012 as it covers the period of room and depression in the economic history of Ebonyi state.
            In the course of this study the researcher was confronted with problems such as
1.         the escalating cost of transport and financial impediments which made the cost of carrying out the research work expensive.
2.         the obvious attempt by banks to classify most of their information that are necessary for the completion of this work due to creation management problems.
3.         The inability to collect the annual report of the banks on the amount of loans that has issued out to farmers for the past years.
4.         this project also encountered the problems of time constraint.

The major focus of this chapter is extent the various literatures as regards commercial bank lending policies and it assessment on the agricultural sector. Also, it evaluate various institutional frame works put in place by the government i.e central bank of Nigeria to promote economic development.
            Different scholars have shared and examined different ideas and issue on the contributions of finance to agricultural growth, banking and farmer attributes to credit and checking whether credit has any significant impact on out put. Based on this we would examine various literatures on issues that borders on commercial banks with particular emphasis on agricultural.
            Schultz (1964) made an attempt to revealing the root problems undermine the development of agricultural sector stating that the way to transform traditional agricultural into relatively cheap source of growth is by investment to produce a supply new agricultural inputs that will be profitable for farmers to adopt”. He also pointed out clearly that what has been lacking in the past is not an un willingness on the part of the agricultural sector to accept new ideas but on public expenditure and organization of particular activities to serve the agricultural sector stating that “the way to transform traditional agriculture into a relatively cheap source of growth is by investment to produce a supply of new agricultural in puts that will be profitable for farmers to adopt. He also pointed out clearly that what has been hacking in the past is not an unwillingness on the part of the agricultural sector to accept new ideas but on public expenditure and organization of particular activities to serve the agricultural sector.
            Classical economists hewis (1955) and Teriba (1972) are of the perspective that farmers need more bank credits. They argued that agriculture in less developed countries is characterized by low productivity and under cultivation. They opined that increased loan-able fonts will permit the financing of new more productive technology.
            Tomori (1979), shared the view that bank loans and advances were insignificance to agricultural production both in absolute and relative terms. This was because farmers who were organized on a small basis and small units were paced with difficultly of obtaining loans since most of the farmers were illiterates and unaware of credit facilities.
            It is also Lander stood that the figure on loan and advances gave on impressive picture of financial assistance to the sector. But the pity of it all was that the small population probably went to the small scale farmers who accounted for the bulk of agricultural production the central bank of Nigeria (2002) revealed that fear of banks and their reluctance to finance agricultural production was due to inability to repay facilities. Most loans granted to farmers in the past have been directed to other wises different from the purpose for which loans were granted. As a result, farmers have found it difficult to pay back and financial institutions have to loose huge founds belonging to depositors. Though loans which advanced to the sector increased from N21 billion in 1994 to 46 billion in the year 2000, relatively, loans to the agricultural sector in comparison to total distarsed loans banking industry within the same period revealed a decline from 8.3 percent to 2.1 percent.
            It was suggested that since loans given out by government was regarded as part of the prove-bial “National cake” all agricultural loans by the government should be routed through financial institutions so as to ensure supervision and follow-up, otherwise it will paresent a situation of every agricultural financing scheme failing as a result of depletion of fund.
            Udabah (1999) pinpointed vigorously that one of problems facing the agricultural sector in any state is the death of capital investment. He opined that farmers large or small scale farmers need credit facilities to expand but what seems to be an impediment is access to such credits. He observed that despite all the programmes initiated by the government to facilitate the availability of credit, the farmers still find it difficult to obtain them.
            Out of this research, he observed that the agricultural sector is increasingly be coming less responsive to the need of the nation. To revive the agricultural sector he suggested there is need for a realistic agricultural credit policies in Nigeria such that will focus on:
·                    Increased agricultural production improved techniques of production
·                    Adequate provision of agricultural credit to all categories of producers.
·                    Adequate infrastructural facilities and input supports and
·                    Poor storage inadequate marketing and distribution arrangement.
·                    He also suggested at eliminating such problems inherent in the system as
·                    Inadequate number of beneficiaries
·                    High interest rates
·                    Uneven distribution of agricultural credits.
·                    Inadequate monitoring and evaluation.
·                    Weak and uncoordinated agricultural credit policies and
·                    High default rate.
Geffon (1974) and Johnson (1982) are of the view that more formal credit should be aimed at small scale farmers. This agreement falls under the growth paradigm. The middlemen farmers are pregvently rational and efficient producers, who would adopt new technologies, expand production, and possibly payback loans if the yields are sufficiently high. They explained that the existing informal loan market for agriculture are exploitative and as a result, there is a contraction of agriculture credit due to high interest rates. They suggested that an organized frame work of the loan market should be put in place.
Agricultural and rural development executive summary (2001) pointed out that in three years of democratic dispensation; the Obasanjo administration has laid a solid foundation in the transformation of agricultural and rural development sub-section toward the attainment of massive food production and ensuring food security in the country.
            The federal government approved a new agricultural policy thrust for Nigeria. The new strategies in the policy include laying a solid foundation for sustained and increased growth in agricultural production and for enhancing output necessary for growth. The main thrust of the new policy and in the area of the new policy and in the area of             
·                    Creating a conductive macro-environment to stimulate greater private sector investment in agriculture so that the private sector can assume its appropriate role in the agricultural sector
·                    Re-organizing the institutional frame for government intervention in the agricultural potential.
The major factor, which militate against the involvement of commercial banks in founding agriculture, was that most peasant farmers did not have acceptable collateral. Lend by commercial banks were also constrained by high cost of administering such loans, an additional factor was the storage of existing commercial banks which became reluctant in major agricultural lending, in that, agriculture involved greater risk and uncertainties when compared with other factors of the economy.
These uncertainties could be draught, famine, flooding, disease etc. if these uncertainties do occur, farmers are likely to default. The risk of default and uncertainties makes it difficult and uncertainties makes it difficult for banks to grant loan to farmers thereby clouding the prospect of making loans credit available to agriculture.

The Banking Act 1969 defines banking business as the business of receiving money from outside source as a deposit irrespective of payment of interest or the granting of money loans and acceptance of credit or the purchase of bills and cheques or the purchase and sale of securities for account of others.
To distinguish commercial banks from other bank, the Act went further to state that any person who transacts banking business in Nigeria and whose business includes the acceptance of deposit withdraw-able by cheque is a commercial bank. The oxford Dictionary of economics defined bank as financial institution whose main activities are borrowing and lending money. Generally, commercial bank specialize in short term lending to customers. By its intermediation function, commercial banks contribute to the mobilization of savings and the optional collection of investible resource (Iyoha 2004).
They help the large agricultural sector in a number of ways, provides loans to traders in agricultural commodities, open network or branches in rural areas to provide agricultural credit, to provide finance directly to agriculturists for the marketing of their product etc.
Thus, commercial banks meet the credit requirements of all types of people. Commercial banks follow the following principles of lending.
·                    Liquidity management
Profitability issues and earning capacity bank portfolio management service delivery and level of efficiency deposit mix and structure credit management. 
·                    Softy
·                    Capital adequacy etc.
According to Robert Bench (1991), the scope of lending policies should include who receives the credit, who grants it and how, the pricing of credit, the amount and the organizational structure of its distribution. The absence of a properly articulated formally written policy document are the critical factors leading to unsuccessful bank lending. Good lending policy ensures effective leading.   
Their commitments over the years have improved considerably owing to the various lending guideline. Ekpebu (2006) reviews that the performance of the agricultural funding has been unsatisfying over the  years due to insufficient funding or credit facilities, inadequate infrastructural facilities, low technology base, high cost of farm input and inadequate extension services.
Experience was drawn prom organization for Economic operation and Development (OECD) countries. He demonstrated that in a competitive financial environment, profitable agriculture can obtain the credit it needs, also suggested that government have vital vole to play in channeling fund to agricultural sector through its policy making.
Radolphe (2005), bringing together loan commitment theories and credit rationing theories, within a framework of asymmetric information between lenders and borrowers and under costly termination of lending arrangements, commitment may explain the accumulation of nonperforming loan by banks.
In this theory, two additional result follow
That banks faviour borrowers with well known production functions and long term credit history and that interest rate may be large if significant market imperfection prevail. In agricultural household models, farm credit is not only necessitated by the lionization of self finance and government expenditure, but also by uncertainty pertaining to the level of farm inputs and outputs and the time lay between inputs and outputs (Sigh et’ at 1980)    
C B N (2003) Identified access to agricultural credit or loans as factor responsible for the sustainable growth in the agricultural sector. Also government has a vital vole in the growth of agricultural in Nigeria (Obiechina 2007) Ekechi (1977) Supported the view that raising the volume of financial savings will increase the volume of total deposit of the banking in the supply of credit to other sectors of the economy (agricultural sector inclusive).
            The relevance of credit in agricultural sector cannot be over emphasized. This is because it is only with adequate credit made agricultural sector (farmers) that can ensure massive food production and it will also enhance the possibility of farmers to have the loan to venture into move diversities agricultural output.
            Jekayinfa (1981) States that the farmers require creation of credit to expand the scope of operation, monetize parading and engaged orderly marketing through storage of product. These combined effects tend to raise the total income of the producer, increase marketable surplus, and raise the level of ingestible fund. Credit can serve as a catalyst for accelerating the rate of agricultural development.
IJere (1986), in his contribution to the relevance of credit maintains that the out- of the way peasant farmers needs to clear additional land, pay for labour, buy additional crops and market the surplus. And this can only be enhanced through adequate credit to peasant farmers. He also maintained that the effects on farmers as greatest with labour and suggested that credit enable labour to the better utilized. The need to in targeted credit structure is important, this rose for the role which agricultural sector play for as foundation for successful development programme.
            On the other hand, inadequate capital or the inability to meet up with the financial needs of agricultural appears to the central factor around which other factors militating against agricultural development especially Abakaliki Local Government Area. Inadequate credit would present rural producers form adopting innovation especially where actual cash is pay for hold produce in store constituted major bottleneck in rural development. It is necessary that bulk of loan should be institutionalized and backed adequate funding, prospers permission and timeliness of operation.
Share on Google Plus


The publications and/or documents on this website are provided for general information purposes only. Your use of any of these sample documents is subjected to your own decision NB: Join our Social Media Network on Google Plus | Facebook | Twitter | Linkedin