INT L JOURNAL OF AGRIC. AND RURAL DEV. SAAT FUTO 2015 PERFORMANCE ASSESSMENT OF BANK OF AGRICULTURE IN IMO STATE, NIGERIA

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1 PERFORMANCE ASSESSMENT OF BANK OF AGRICULTURE IN IMO STATE, NIGERIA Chukwu, A.O, Ikeanyionwu, I.G and Okoroh, J.P. Department of Agricutural Economics, Extension and Rural Development, Imo State University, Owerri. Abstract The study broadly assessed the performance of Bank of Agriculture (BOA) in Imo State, Nigeria. Specifically, it determined farmer assessment of loan administration method of the bank; assessed farmer perception about loan disbursement; determined rate of loan repayment; determined attributes of ness of use of loan by BOA; ascertained clients perception about activities of the BOA and farmer relationship with the BOA. Four branches of the bank in the state were sampled for the study. Twenty (20) beneficiary farmers and five (5) BOA staff were sampled from each branch given a sample size of 100, comprising eighty () famers and twenty (20) BOA staff. Primary data were collected using two set of structured questionnaire forms designed in different Likert scale point rating system. Analysis was carried out using percentages and mean statistic. It was found that the BOA were both in handling loan administration and loan disbursement following the overall mean of 3.02 and Farmers were found to be in the use of loan granted them by the bank, hence the overall mean of 3.14 is adjudged very. Also, the activities of the BOA were very satisfactory to the clients, and there was cordial relationship existing between the clients and staff of the bank. The study recommends more loan administration method and timely disbursement of loan to clients by the BOA. Keywords: Agriculture, Bank, Credit, Performance Introduction Bank of Agriculture (BOA) is the Nigerian premier agricultural and rural development finance institution, 100% wholly owned by the Federal Government of Nigeria. The ownership structure is: CBN (40%) and Federal Ministry of Finance incorporated (60%). The Banks mission is to provide efficient, customer friendly financial and advisory services for agricultural development, and this it does by deploying appropriate technology and highly motivated staff contributing to the economic transformation of Nigeria. Bank of Agriculture Provides affordable credit facilities to segments of Nigeria society who have little access to the services of conventional banks. The private investment in agriculture in terms of bank credit is the least among all economic sectors. From , the average total annual flow of bank credits to agriculture was only 2.27% of their total credit (Eboh, 2011). In public sector investment to agriculture within , Federal government spends 4.4%, while state government spend on the average of 3.4%. However, the long term average ratio of agriculture to Gross Domestic Product (GDP) is about This collaborates with the observation by Sackey (2011) that public policy towards agriculture in Nigeria prior to 1974 has been taxing agriculture to finance other sectors. Abe (1981) hence posited that the problem of financing agriculture should not be confined to the provision of institutional loanable funds to farmers, but should more importantly extend to the efficient administration of the available loanable funds. In his own position, Oduma (1986) stated that most problems associated with loan repayment of farmers was as a result of weak and in handling of loan administration. In spite of the importance of loan in agricultural production, its recovery is faulty with a number of problems especially in the small-holder farming. Adamu (1978), posited that farmers most often refrain from paying back loan credited to them by banks and other financial institutions hence loan repayment is adjudged low and poor. He further stated that this could be as a result poor record keeping or inadequate information about the loan beneficiary. The poor repayment of loan has affected so many financial institutions to the extent of causing them to liquidate. Over the years, farmers have been found to be insensitive, resolute and unresponsive on repayment of agricultural loans acquired from banks (Oladebo, 2008). The Bank of Agriculture (BOA) has operated in the state since the era of the defunct Nigeria Agriculture and Cooperative Bank (NACB) and investigation in the operation and participation of the clients about the bank will give an insight into its performance in Imo State particularly. BOA inherited most of the problems of Nigeria Agriculture Cooperative and Rural Development Bank (NACRDB) such as delay in disbursement of agriculture loans to farmers, lack of disposition of the bank to modern loan appraisal technique resulting to poor loan management, diversion of funds by bank s management for non-agriculture has received limited attention alongside the factors that has led to this situation. The study therefore is challenged to fill this gap by assessing BOA performance in Imo State of Nigeria and make suggestions that could improve its activities. Specifically the study: determined farmer assessment of loan administration method of BOA; assessed farmer perception about loan disbursement; determined rate of loan repayment; determined Volume 18 : ,

2 attributes of ness of use of loan by BOA; ascertained clients perception about activities of the BOA, ascertained farmer relationship with the BOA; and determined problems associated with obtaining loan from BOA. The study postulated a hypothesis which states that BOA is not in assessing loan usage by farmers. Materials and Methods The study area is Imo state which covers a total area of 2,140 square metres, with a population of 3,934,899 people (NPC, 2006). The agricultural zones in the state are Orlu, Owerri and Okigwe with the offices of BOA located across Owerri and Orlu agricultural zones. Owerri zone housed three branches located at Owerri municipal, Ikeduru and Aboh-Mbaise Local Government Areas (LGAs) while the branch at Orlu Zone situates in Orlu LGA. The branches works independently from each other and take directives from its zonal office in Enugu. All the branches were sampled for the study. The respondents were farmers who benefit from the bank and workers of the bank. Twenty (20) farmers and five (5) workers of the BOA were randomly sampled from each of the branches. Hence, the sample size is eighty () farmers and twenty workers given the total number of respondents as 100. Data were collected from both primary and secondary sources. Primary data were collected using two sets of structured questionnaire (One for the loan beneficiaries and the other for the bank staff). The instrument was designed in various point Likert scale ratings. Farmer assessment of loan administration method was subjected to a four point Likert scale of very (VE), (E), Not (), and undecided (UD) which produced a central discriminating index of 2.5. Farmer perception about loan disbursement was rated in a three point Likert scale of VE, E, and with a central mean of 2. Also, attributes of ness of use of loan by BOA were subjected to a four point Likert scale of VE, E, and UD, with a discriminatory index of 2.5. Clients perception about activities of the BOA was exposed to a four point Likert scale of Satisfactory (VS), Satisfactory (S), Not Satisfactory (NS) and Undecided (UD) with central mean of 2.5. Analysis was carried out using percentage and mean statistic. Results and Discussion Loan beneficiaries of BOA assessed loan administration method of the bank. This is contained in Table 1. Various attributes of loan administration were categorized and these were rated in a four point Likert scale rating which produced a central mean or discriminating index of 2.5. Based on this, all the attributes of loan administration were accepted as being. The overall mean (3.02) was accepted as being. Therefore, the bank staff were adjudged in handling loan administration. This result contradicted the finding of Oduma (1986) that problem associated with loan repayment by farmers was as a result of inness in handling loan administration. Table 1: Farmer assessment of loan administration method of BOA Attributes (4) Timely approval of loan Timely disbursement Giving proper amount of loan Loan recovery measures Security and collateral requirement UD Table 2 contains farmers opinion about disbursement by the BOA. The various attributes of disbursement were categorized and rated in a three point Likert scale which produced a central mean of 2. This implies that values greater or equal to 2 are accepted as and values less than 2 are accepted as not. Based on this, giving sufficient amount of loan, use of modern loan appraisal method and loan supervision by bank staffs were accepted as being, while others were rated in. However, since the overall mean (2.11) was accepted as, it means that the farmers adjudged the loan disbursement by the bank as being ly done. This finding is in tandem with BOA (2011) position that because of the quality plan of bank of agriculture, loan disbursement has being made. Volume 18 : ,

3 Table 2: Farmers perception about loan disbursement rated in a 3 point Likert scale Attribution Timely disbursement of loan Reject Giving sufficient amount Good disbursement plans Reject Use of modern loan appraisal method Timely approval of loan application Reject Loan supervision by bank staff Table 3 contains rate of repayment of loan given to farmers for a period of four years, 2010, 2011, 2012 and The rate at which the farmers were repaying the loan was categorized under 25%, 50%, 75% and 100%. With the rating scale of Likert system, 2.5% was found to be the central mean. Based on this, all the repayment was rated or accepted under 50%. This shows that all the farmers were able to repay their loans up to 50% over the years involved. None of them repair loan up to 100% which shows a poor loan repayment among them. This result is slightly in agreement with the position of Adamu (1978) that because of poor record of loan beneficiaries, most of them refrain from paying back hence there is low loan repayment. Table 3: Rate of Repayment of loan from under levels of 25%, 50%, 75% and 100% Year 25% 50% 75% 100% (4) as 50% as 50% as 50% as 50% as 50% Table 4 shows the rating of ness of use of loan by BOA. The ness was categorized and subjected to a four point Likert scale rating with a discriminatory index of 2.5. Based on this, all the attributes were accepted as being. It implies that, the famers were in the attributes of loan usage. Proper supervision of loan use and proper repayments of loan were rated as being while the farmers were very in the rest of the attributes. However, since the overall mean was 3.14 which is slightly above 3-, the farmers can be said to be very in the use of loans granted them by the bank. This is in contrary with the CBN (2003) report that low production of small-scale farmers were as a result of poor usage of loan granted to them by banks and other financial institutions. Table 4: Rating of attributes of ness of use of loan by BOA Attribution (4) Volume 18 : , UD Proper application for loan Wholesome use of loan amount Timely use of loan Proper supervision of loan Profitable use of loan Proper repayment of loan Result in Table 5 shows activities of BOA as perceived by farmers. The activities were rated using a four point Likert scale rating system. The central mean was 2.5 and using discriminating index, any value equal or greater than 2.5 is accepted as satisfactory and any value less than 2.5 is

4 unsatisfactory. However, looking at the individual attributes, only promotion of capacity building and provision of affordable credit facilities were not adjudged very satisfactory. All the attributes were accepted as being satisfactory. The overall mean was accepted as being very satisfactory. Therefore the activities or functions of the BOA were very satisfactory to the clients. Table 5: Clients perception about activities of the Bank of Agriculture Activities/Attributes VS S NS UD (4) Provision of customer friendly and advisory services Provision of opportunity for self-employment ing deposit and encouraging banking habit Promotion of capacity building through training Encouragement of formation of cooperation societies Fostering accelerated growth and development Provision of affordable credit facilities Farmer relationship with BOA was determined in Table 6, as either being cordial or not. The respondents claimed that they had cordial relationship (88.75%) with the bank staff and management. This cordial relationship existing between them had made it possible for the bank staff to offer even personal assistance and services to the farmers. Table 6: Distribution of the farmers on the kind of relationship with bank Relationship type Frequency Percentage Cordial Non cordial Table 7 gives information about the numerous problems associated with obtaining loan from the bank as enumerated by the farmers. Among the problems, late disbursement of loan ranked first (62.5%), followed by stressful procedure (35%) and insufficient amount of loan (23.75%). Table 7: Distribution of respondents on problem of obtaining loans Problem Frequency Percentages Unavailability of collateral Stressful procedure Later or delay disbursement Relunctancy in giving out loan Insufficiency of loan amount Poor disbursement plans Loan appraisal method Problem of securing guarantor Conclusion bank becomes very in the approval and The study which sought to assess disbursement of loan to customers. performance of Bank of Agriculture in terms of loan delivery services to farmers has shown that the bank References was in her functions. The farmers were Abe, S.I (1981): Nigerian Farmers and their Finance satisfied with services they received from the bank Problems. Seminar Paper on Agricultural and they had cordial relationship with the bank Credit and Finance in Nigeria. (Problems administrators. They however complained about and prospects) CBN at Abuja. delays in approval and disbursement of loan which Adamu O. (1978): Management and Funding aspect had made their loan repayment to be poor. The of agriculture in Nigeria. Paper presented farmers will do better in their farming business if the at the 4th Annual conference of Agricultural Society of Nigeria at Benin. Volume 18 : ,

5 Bank of Agriculture, BOA (2011): Statistical Bulletin. Central Bank of Nigeria, CBN (2003): Agricultural Development. Issues of Sustainability. In O.J. Nnanna, S.O. Alade, E.O. Odoko (Eds). Contemporary Economic Policy Issues in Nigeria: CEN Publication Abuja, pp Central Bank of Nigeria, CBN (2007), Statistical Bulletin, Abuja: CBN publication. Eboh, E.C (2011): Agricultural Economy of Nigeria: Paradoxes and Cross Roads of Mutimodal Nature: 56th Inaugural Lecture of the University of Nigeria delivered on January 27, Nigerian Population Commission (NPC) (2006): Population Census. National Bureau of Statistics of Nigeria, Abuja. May Retrieved 27 July Oduma V. (1986): The Nigeria Agricultural and cooperative Bank, Its Operation, Problems and Prospect. Bullion Silver Jubilee Edition, Vol. 2 CBN publications. Oladeebo, J.O, Oladeebo, O.E (2008): Determinants of loan repayment among small holders farmers in Ogbomoso Agricultural Zone of Oyo State Nigeria. Journal of Social Sciences, 17 : Sackey J.A (2011): Towards Accelerated Growth and Transformation of the Nigerian Economy: Missed Oppurtunities. Volume 18 : ,