NEXUS BETWEEN INTERNAL VALUE CHAIN FINANCE AND COCOA PRODUCTION IN SOUTHWESTERN NIGERIA: IMPETUS TO AGRICULTURAL PRODUCTIVITY AND SUSTAINABILITY
2017
I, Ogunjimi S | T, Alao O | O, Alabi O
In view of the fact that securing loan for agriculture in financial institutions has become difficult as a result of the inability of small holder farmers to provide collateral securities, the Internal Value Chain Finance (IVCF) which takes place within the value chain is increasingly becoming the major source of finance in cocoa production. The study was carried out in Southwestern part of Nigeria. The study described the socio-economic characteristics of the cocoa farmers and IVCF; identified the sources of IVCF; examined the conditions that impact on the borrower and lender; and appraised the prospects and challenges of IVCF. Data were collected from 120 cocoa farmers through the use of interview schedule. Data analysis was carried out using frequency counts, percentages, mean, standard deviation and probit regression model. Contrary to popular opinions that farmers’ main sources of finance were cooperatives and commercial banks, the study revealed that the major source of financing cocoa production in the study area is IVCF such as cocoa merchants or input supplier which provide credit to known producers and lead firm funds advances to market intermediaries. Furthermore, respondents claimed that the credit granted to them was flexible in terms of ease of repayment; interest free, accessibility and timeliness. The main prospect of the IVCF was that cocoa farmers have access to loan which enhances increased production and sustainable income. The problems facing IVCF include lack of transparency on the part of farmers, cocoa merchants and input suppliers and high risks related to uncontrollable factors such as global price fluctuations and natural disasters. There is need for extension agency and policymakers to train the farmers on the procedures of obtaining loans from lenders and provide reliable information on IVCF functioning, success factors and results. Lenders should also assess the credit-worthiness of the specific borrowers before giving out loans
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