ABSTRACT
This study evaluated the effect of microcredit and gender related variables on welfare of smallholder cassava- based producing households in Abia state, Nigeria. Primary data were collected from smallholder cassava- based producers who were registered with the ADP from 2014 –2019. A multistage sampling technique involving purposive and random sampling technique were used in the selection of 240 respondents comprising of 80 microcredit user households (40 males and 40 females) and 160 microcredit non user households (80 males and 80 females). `Analytical tools used were descriptive statistics, welfare index, Ordinary Least Squares multiple regression analysis, Chow test and paired Z-test. Results on socio economic characteristics showed that the mean age of the producers were 51 and 48 years and (81.67% and 68.33%) were married for the male and female household heads respectively. They had up to 14 years farming experience and about 80 % attended at least primary school for the male and female household heads. Mean household size of 6 persons, mean farm sizes of 2.13 and 1.67 hectares, mean income of ₦365,548 and ₦317,273 were gotten for the male and female headed households respectively. The mean amount of credit received by the male headed household was ₦150,875 and that of the female headed household was ₦115,530. The mean output of the male headed household was 19.42 tonnes/hectare while that of the female headed household was 12.05 tonnes/hectare. The results of the welfare status showed that the male credit users and non-credit user households had more non poor people as compared to the female headed credit user and non-credit user households. The results of Ordinary Least Squares multiple regression analysis model showed that amount of credit received and household size significantly affected welfare at 5 percent while loan duration, interest payment on loan, farm size and income significantly affected the welfare of the male cassava producing households at 1 percent. Also, amount of credit significantly affected welfare at 5 percent while loan duration, interest payment on loan, value of land used as collateral, household size and income were significant factors that affected the welfare of the female cassava producing households at 1 percent. Results on welfare function showed that age, household size, size of land holding, age composition, income and cost of production were the factors that influenced the welfare of the microcredit user households while age, education, size of land holding, composition of members that are working, income and cost of production were the factors that influenced the welfare of the non-microcredit user households. The Chow test showed that the male headed credit user households and the male headed non-credit user households had a higher profitability than the female headed credit user households and the female headed non-credit user households. The Z-test results showed that the male headed cassava producing households had more output, income and profit than the female headed cassava producing households. It was recommended that government incentives in encouraging favourable lending conditions should be encouraged and sustained and policies/programmes that encourage gender equality should be put in place to encourage the entrepreneurs to harness and optimize use of credit borrowed to make more profit and improve their welfare.
TABLE
OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements
v
Table of Contents vi
List of Tables ix
List
of Figures xi
Abstract
CHAPTER 1: INTRODUCTION
1.1
Background Information 1
1.2
Problem Statement 8
1.3
Objectives of the Study 10
1.4
Hypotheses of the Study 11
1.5 Justification
of the Study 11
CHAPTER 2: LITERATURE
REVIEW
2.1 Conceptual Literature 13
2.1.1 Concept
of microcredit 13
2.1.2 Concept
of microcredit related variables 14
2.1.3 Sources
of credit to agro enterprises 19
2.1.4 Conditions
for extending credits to customers 20
2.1.5 Concept
of gender 21
2.1.6 Concept
of gender related variables 22
2.1.7 Concept
of household welfare 26
2.1.8 Measurement
of household welfare 28
2.1.9 Household
characteristics 30
2.1.10 Smallholder
producers 32
2.1.11 Concept
of profitability 33
2.1.12 Cassava
production in Nigeria 34
2.2 Theoretical
Literature 39
2.2.1 Theories
of gender 39
2.2.2 Theories
microcredit related variables 40
2.2.3 Theories
of welfare 42
2.3 Empirical
Literature 44
2.3.1 Empirical
review of related studies on gender related variables 44
2.3.2 Empirical
review of related studies on microcredit related
on welfare 47
2.3.3 Studies
on socioeconomic determinants of household welfare 51
2.4 Analytical
Framework 55
2.4.1
Socioeconomic characteristics of respondents 55
2.4.2 Estimation
of welfare index of smallholder cassava producers 55
2.4.3 Regression
models 56
2.4.4 Estimation
of welfare function 57
2.4.5 Estimation
of profitability 57
2.4.6 Z-test model 58
CHAPTER
3: METHODOLOGY
3.1 Study
Area 59
3.2 Sampling
Procedure 62
3.3 Data
Collection 64
3.4 Analytical
Procedure 64
3.4.1 Test for
change in welfare 67
3.4.2 Test for
homogeneity of slopes for welfare 68
3.4.3 Test for
differences in interest for credit 68
3.4.4 Comparison
of profitability of male and female beneficiaries 69
3.4.5 Test for
structural shift in profitability 69
3.4.6 Test for
homogeneity of slopes for profitability 70
3.4.7 Test for
differences in intercepts for profitability 70
3.4.8 Test of
hypotheses on gender variables affecting welfare 70
CHAPTER
4: RESULTS AND DISCUSSION
4.1 Socioeconomic and Demographic
Characteristics of the Producers 72
4.2 Effect of Microcredit Related Variables
that affect the Welfare of Male Credit user Households 102
4.2.1 Microcredit Related Variables that affect
the Welfare of Female 106
Credit user Households
4.2.2 Welfare of the Microcredit User and Non-User
Households 109
4.2.3 Tests for structural shift in welfare
function and difference in
welfare 115
4.2.4 Effect of Gender Related Variables Affecting
Welfare of Respondents 117
4.3 Comparison of Welfare Status by Gender 124
4.4 Profitability of Microcredit User and Credit
Non user Households by
Gender 127
4.4.1 Profitability of credit user households by
gender 128
4.4.2 Tests for structural shift in profitability
and differences in
profitability of credit user
households by gender 134
4.5
Factors Affecting the Welfare of Cassava Producing Households by
Gender 136
4.5.1 Tests for structural shift in welfare
function and difference in
Welfare of microcredit user
households 142
CHAPTER
5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 144
5.2 Conclusion 146
5.3 Recommendations 147
References 150
Appendix 164
LIST
OF TABLES
3.1 Sample
size and sampling frame 63
4.1 Distribution
of the respondents based on age 73
4.2 Distribution
of the respondents based on marital status 75
4.3 Distribution of the respondents based on
education 77
4.4 Distribution of the respondents based on
household size 79
4.5 Distribution
of the respondents based on farming experience 81
4.6 Distribution
of the respondents based on farm size 83
4.7 Distribution
of the respondents based on membership of cooperation 85
4.8 Distribution
of the respondents based on other crops planted 87
4.9 Distribution of the respondents based on
sources of farm land 89
4.10 Distribution
of the respondents based on amount of credit received 91
4.11 Distribution
of the respondents based on farm income 93
4.12 Distribution
of the respondents based on output 95
4.13 Distribution
of the respondents based on sources of finance 97
4.14 Distribution
of the respondents based on problems encountered in farming 99
4.15 Test for
differences in major Socio economic variables of the male
and female cassava based producing households 101
4.16 Effect of microcredit related variables
that affect the welfare of the
male credit user cassava based
producing households 102
4.17 Effect of microcredit related variables
that affect the welfare of the
female credit user
cassava based producing households 106
4.18 Estimated welfare function of the male
credit user and male non-credit user households 110
4.19 Tests for differences in welfare for user
and credit non user
households 116
4.20
Paired Z-test to compare the gender
related variables outcomes affecting the
welfare of the male and
female cassava based producing households 118
4.21 Distribution of cassava producing
households according to their welfare Status 124
4.22 Profitability and returns on investment of
credit user and credit non user households by gender 127
4.23 Profitability of credit user households
by gender 129
4.24 Tests for differences in profitability of
microcredit user households by gender 134
4.25 Estimated welfare functions of microcredit
user households by
Gender 137
4.26 Tests for differences in welfare of male
and female credit user
Households 142
LIST
OF FIGURES
Fig 2.1 Estimates
of root yield and total output for cassava in Nigeria during
1999 – 2018. 38
Fig 3.1 Map
showing Abia State Local Government Areas and the Selected Communities
for the study 61
CHAPTER
1
INTRODUCTION
1.1
BACKGROUND
INFORMATION
Smallholder producers are vital for
Nigeria’s agricultural and rural economy and are drivers of many economies in
Africa. Smallholder producers are farmers that own or/and cultivate less than 5
hectares of land on which they grow subsistence crops and rely most exclusively
on family labor (Kutya, 2012). They constitute about 78 percent of the Nigerian
farmers.
Smallholder
cassava producers like other small business sector have been the means through
which accelerated economic growth and rapid industrialization can be achieved
especially in developing countries (Hocket, 2016). They encourage
entrepreneurial activities, introduce innovative technologies, boost
productivity and make a major contribution to the well-being of the
entrepreneurs and the national economy at large (Fatawu et al., 2014).
These
smallholder cassava producers/farmers, who are the respondents of this
research, are farmers registered with cooperatives and are associated with the
Agricultural Development Programme (ADP). They are being trained by the ADP
extension agents on improved techniques of cassava production. The small loan
mobilization unit under the Rural Institution Development (RID) in the ADP
office, link these smallholder cassava producers to banks to obtain microcredit
for their farming operations. They link them up to banks like Bank of
Agriculture (BOA), LAPO Microfinance Bank and others. The extension agents also
link them up to market where their cassava produce are sold to encourage them
stay in business.
The
cassava sub-sector is notably significant in the agricultural sector as a
result of its contributions and potentials in the economy. Cassava (Manihot esculenta) is a popular
perennial crop of the roots and tubers that grow in tropical and subtropical
areas of the world. It is regarded as food security and poverty alleviation
crop because of its special attributes which include ability to make returns of
root yield even in extreme stress conditions and requirement of minimal
external inputs all year round (James et
al., 2015). It is one of the major crops grown by the smallholder farmers
in the eastern part of Nigeria. It is one of the staple foods and cash crops
that contribute about 15% of the daily dietary energy intake of most Nigerians
and supplies about 70% of the total calories intake in about 60 million people
in Nigeria (Ahmadu et al., 2014). As
a crop with a variety of uses, it has played and continued to play a central
role in Nigeria’s agricultural sector.
The
realization of the potentials of cassava for contributing to the attainment of
self-sufficiency in food production, informed the decision of the government of
Nigeria to initiate a Cassava Transformation Programme. This programme seeks to
create a new generation of cassava farmers oriented towards commercial
production and processing of cassava. This is with a view to turn cassava
sector in Nigeria into a major player in local and international starch, sweeteners,
ethanol high quality cassava flour (HQCF), and dried chips industries. A Presidential
Initiative on Cassava (PIC) which is called presidential intervention on
cassava among other crops was launched in 2003 (Ikuemonisan et al., 2020). The PIC aims at generating 5 billion Naira
annually from the exportation of cassava products (pellet, cassava, starch and
chips) and to develop an internal market for cassava producers. The strategy is
to develop domestic market and create national policies for cassava development
(Food and Agricultural Organisation, STAT, 2012). The government actively
pursued policies and programmes that could create demand for cassava products
and some of the notable policy intervention and programmes include cassava
bread policy. The government mandated the flour milling industries and bakeries
to contain 10 percent cassava flour into all bread produced in Nigeria.
Implementation of this policy created a demand of 250,000 tonnes of High
Quality Cassava Flour (HQCF) which will require about 1 million tonnes of
cassava tubers annually (Wossen et al.,
2017), They made the Automotive Biofuel Policy 2007 which created demand for
cassava. They mandated the Nigerian National Petroleum Cooperation (NNPC) and
its subsidiary Acomna the Petroleum Product Marketing Company (PPMC) to
distribute gasoline containing 10 percent bioethanol (E10). This
policy can create a demand of 1.3 billion litres of fuel grade ethanol annually
(Central Bank of Nigeria, 2010). Also, the government of Nigeria planned to
replace paraffin with bioethanol as the cooking fuel. This will create a demand
of 3.75 billion litres of ethanol which can require nearly 21 million metric
tonnes of cassava tuber (Ohiman, 2014). Despite these developments, the output
of cassava still falls below total demand as food, for industry and for export
(Wossen et al., 2017).
Governments
in the developing world and their developed partners pay considerable attention
to the potential of cassava and this brought about a general agreement for a
global strategy for cassava development (International Fund for Agricultural Development,
2006) especially through empowerment activities of Women in Agriculture
Programme (WIA). Women play a central role in cassava production and contribute
about 78 percent of labour with involvement in hoeing, weeding, harvesting,
transporting, storing, processing, marketing and men work predominantly on land
clearing, ploughing and planting (FAO, 2009, Kehinde et al., 2015). Cassava is often defined as a woman’s crop. Despite
the immense contribution of women in agriculture, reports show that women in
Nigeria lack access to adequate productive resources due to their
socio-economic status (Nwachukwu, 2012). However, inclusive transition
strategies are needed to address key constraints women face at disproportional
levels than men. Gender is a term often associated with roles and
responsibilities of males and females and how this affects society, culture,
the economy and politics (Radipere et al.,
2014). In all cultures, gender determines power and resources for male and
females (Igberi, 2012). In almost all
societies women and men differ in their activities and undertakings regarding
access to and control over resources and participating in decision making. As a
result of these differences, their views, needs, priorities and constraints to
improving their productive potentials differ. These could affect their various
outputs even in cassava enterprise development (Ali et al., 2015).
Okali
(2011) observed that women have been the core subject of gender and indicated
that the term “gender issues” have been widely used to refer to disadvantages
faced by women in the field of agriculture despite the theoretical meaning of
gender as roles of males and females.
Women
face gender specific constraints and are often marginalized in their families
and communities suffering from a lack of access to credit, land, education,
decision making power and right to work (Ali et al., 2015) These genders related constraints affect the income
and profit of women entrepreneurs and thus their welfare (Baht et al., 2017).
According
to (Ezeibe et al., 2015), the need to
advance gender equality in business is relevant for all economies, regardless
of their development levels. There has been a great disparity between males and
females even in the size of land holdings as well as their involvement in
cassava production (Osuji, 2017).
With
respect to access to credit, International Finance Corporation (2014), observed
that women entrepreneurs tend to face more problems than men entrepreneurs in
meeting the credit needs. Assets to be used as collateral by women makes it
difficult for women entrepreneurs to borrow credit to carry a significant
weight and this affects their contribution to economic growth.
Credit
is an effective means for poor people to increase their economic security,
reduce the impact of economic shocks, increase their assets, productivity and
income and thus improve their welfare (Madole, 2013). It is an important
instrument for improving the welfare of the poor directly through smoothing of
consumption in a context where income typically experience large seasonal fluctuations.
Hennessey
(2006), affirmed that small loans given to poor borrowers or to small
businesses whose financial capital base are not large enough to access larger
loans for the acquisition of such small loans would enhance business
profitability of such ventures and this is what is called microcredit. Furthermore,
Alhassan et al., (2016) observed that
easing potential capital constraints through the granting of credit reduces the
opportunity costs of capital incentive assets relative to family labour, thus
encouraging the adoption of labour saving, higher yielding technologies and therefore
increasing productivity and profitability which is the primary goal of all
business ventures and a crucial factor in encouraging development.
Profitability is the ability of a given investment to earn a return from its
use. A business that is highly profitable has the ability to reward its owner
with large return on investment. The ultimate goal of a business entity is to
earn profit in order to sustain the business in prevailing market condition and
an increase in profit will improve the welfare of the entrepreneur.
Due
to the importance of cassava products, the welfare of households depends on it
for sustainability. Welfare could be said to represent the people’s standard of
living and or the economic well-being of an individual, group or economy. In
theory, household consumption expenditure on food and education is used as a
proxy for welfare indicator (Quartey, 2006). The effect of microcredit on the
welfare of smallholder farmers in a developing economy like ours is very
important because accessibility to such credit will promote the agricultural
activities of the farmers, increase the employment of resources, raise the
income level of these farmers and subsequently improve their welfare (Okurut et al., 2014). The extent to which small
enterprises could access fund is the extents to which small firms can save and
accumulate own capital for further investment (Babajide, 2012). However,
smallholder producers in Nigeria find it difficult to access formal financial
institutions such as commercial banks for fund. The inability of the
smallholder producers to access financial institutions for loan consideration
provides a platform for informal institutions to attempt to fill the gap
usually based on informal social networks, and this is what gave birth to micro
financing.
In
order to enhance the flow of financial services to the smallholder producers,
government in Nigeria has, in the past, initiated series of programs and
policies targeted at the small enterprises. Notable among such programs were
the Small Scale Industries Credit Guarantee Scheme (SSICS) (1971), specialized
financial schemes through development financial institutions such as the
Nigerian Industrial Development Bank (NIDB) (1964), Nigerian Bank of Commerce
and Industry (NBCI) 1973, and National Economic Recovery Fund (NERFUND) (1989).
All of these institutions merged to form the Bank of Industry (BOI). In 2000,
the government also merged the Nigeria Agricultural Cooperative Bank (NACB),
the People’s Bank of Nigeria (PBN) and Family Economic Advancement Programme
(FEAP) to form the Nigerian Agricultural Cooperative and Rural Development Bank
Limited (NACRDB). The bank was set up to enhance the provision of finance to
the agricultural and rural sector (Adeyemi, 2008).
In
2003, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN),
an umbrella agency to coordinate the development of the small and medium
Enterprises (SME) sector was established. In the same year, the National Credit
Guarantee Scheme (NCGS) for SMEs to facilitate its access to credit. The scheme
aimed, among other things to assist the establishment of new, viable small and
medium industries (SMI) projects, thereby stimulating economic growth, and
development of local technology promoting indigenous entrepreneurship and
generating employment. Despite all these efforts, the contribution of
smallholder enterprises to Nigeria Gross Domestic Product (GDP) remains very
poor, hence, the need for alternative funding window (CBN, 2005).
In
2005, the Federal Government of Nigeria adopted microfinance as the main
financing window for smallholder enterprises in Nigeria. The Microfinance
Policy Regulatory and Supervisory Framework (MPRSF) was launched in 2005; the
policy among other things, addressed the problem of lack of access to credit by
smallholder operators who do not have access to regular bank credits.
According
to Fernando (2006), despite the fact that there is a significant relationship
between microfinance credit and welfare of the smallholder cassava producers,
their impact is limited because of stringent conditions of the financial
institutions which are the microcredit related variables which include; small
loan size, high interest rate, short repayment period, collateral requirement
etcetera. This can increase the burden on the smallholder producers.
Most
microcredit programs around the world target women and this is to help them
earn income, gain financial independence, strengthen their decision making
power within the household and society and improve their welfare (Zhang and
Posso, 2017). Earlier studies on welfare have identified microcredit as a
factor that explains household’s welfare. There is a relationship between
microcredit and welfare of smallholder farmers but its impact is limited because
of the microcredit related variables. This research examined the effect of
microcredit and gender related variables on welfare of smallholder cassava
producers in Abia State, Nigeria.
1.2 PROBLEM
STATEMENT
Microcredit
enables the small enterprises tap the financial resources and take advantage of
the potentially profitable investment opportunities in their immediate
environment (Waithanji, 2014). It plays a crucial role in improving the welfare
of the entrepreneurs but the stringent conditions associated with it can
increase burden on the very poor entrepreneurs as posited by the opponents of
microcredit schemes, but questions whether that has always been the case
(Bateman and Chang, 2009). These conditions such as high interest rate, small
amount of loan given, short period of loan repayment, collateral requirement
makes it difficult for the entrepreneurs to enjoy the benefit of microcredit
and has to be addressed in this research. Microcredit practitioners and schemes
target women to help them earn income, gain financial independence and
strengthen their decision making power within the household and society (Zhang
and Posso, 2017). In this regard, some studies that aimed to evaluate factors
that affect microcredit have used gender differences among their variables but not
in the dichotomy of gender of cassava – based agropreneurs and how it affects
their welfare.
In
addition, empirical data segregation on factors influencing gender outcomes in
business is rather scarce and difficult to obtain. This is because gender
differences in factors affecting welfare of smallholder producers remained
largely unaddressed by social scientists and developmentalists. The majority of
the studies either disregard gender as a variable of interest or excluded
female subjects from their design (Lagat et
al, 2017). Failure to grant equal property rights may further impede
women’s ability to seek funding in the capital markets since they cannot
collateralize their assets effectively to obtain credit.
There
are several different strands of literature relevant to the thesis of how
gender affects participation in entrepreneurship activities and economic
development. The argument which emerges in the literature is that women have
been marginalized in society. This marginalization has been in form of unequal
opportunities in economic activities and inequalities in access to the
productive resources (Ogunlela et al,
2009). Women’s entrepreneurship is important since it gives them the option to
pursue better economic opportunities working in their own businesses. The need
to advance gender equality is relevant for all economies regardless of their
development levels. In the case of developing economies like Nigeria using Abia
state as a case study, the untapped potentials of advancing women owned
enterprise means that more businesses and employment could flourish if women
entrepreneurs are given the same opportunity as their male counterparts.
Despite
the fact that there is a significant relationship between microcredit and
welfare of smallholder producers, their impact is limited because of
microfinance stringent conditions such as short loan repayment duration which
does not make it possible for microcredit to be able to generate future income,
high interest rate which discourage smallholder producers from borrowing and
investing into potentially profitable investment opportunities, small amount of
loan received, which discouraged smallholder producers from expanding their
businesses and investing in business opportunities which does not come often.
All this microcredit related variables made microcredit unable to generate
future income, thus preventing savings, consumption and welfare.
Based
on the problems highlighted above, some questions have become pertinent to
provide answers to. These include;
i)
What are the
socio-economic characteristics of smallholder cassava based producers by
gender?
ii)
What effect does microcredit
and gender related variables have on the welfare of smallholder cassava based
producers in the study area?
iii)
What are the welfare
indices of smallholder cassava producers who are beneficiaries and
non-beneficiaries of microcredit?
iv)
Is there any significant difference
between profitability of beneficiaries and non-beneficiaries of microcredit?
v)
What factors influence
the welfare of smallholder cassava producers in the study area?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to analyse the
effect of microcredit and gender related variables on welfare of smallholder
cassava based producers in Abia State, Nigeria. The specific objectives are to;
i.
describe the
socio-economic and demographic characteristics of the smallholder cassava based
producers by gender,
ii.
analyze the effects of
microcredit and gender related variables on welfare of smallholder cassava
based producers.
iii.
Compute and compare the
welfare status of smallholder cassava based producers by gender for both
beneficiaries and non-beneficiaries of microcredit,
iv.
compare the profitability
of male and female beneficiaries of microcredit.
v.
estimate the factors
influencing the welfare of the smallholder cassava based producers (household
heads) across gender for both beneficiaries and non-beneficiaries of microcredit
in the study area.
1.4 HYPOTHESES
OF THE STUDY
In
line with the objectives the following hypotheses were tested:
H01: Microcredit related variables (Interest rate,
amount of loan received by the producers, loan repayment period, loan duration
and collateral requirement) do not have a significant effect on the welfare of
smallholder cassava producers.
H02: There is no significant difference between
the output, income, and welfare of the male and female cassava producing
households.
H03:
There is no significant difference between profitability of the male credit
user households and female credit user households and also the male non-credit
user households and female non-credit user households
1.5 JUSTIFICATION
FOR THE STUDY
Cassava
has been proven to be economically viable with countless raw materials that
when explored to the fullest, has the potential to inject over ₦20 trillion
into the nation’s economy. Most industries in Nigeria use large quantity of
cassava as their raw material but sadly this raw material from cassava is
imported by these industries because the local processors do not meet up with
the supply. Nearly every person in Africa eats around 80kg of cassava per year.
It is estimated that 37% of dietary energy comes from cassava. This could
encourage smallholder cassava producers to increase production which would lead
to an increase in income and thus enhance the welfare of the producers (Nwaobiala,
2018).
Results
of this study will be beneficial to Bank of Agriculture (BOA) as the play a
role in agricultural and economic development, bring about increase in
employment, generate income and reduce poverty. It will also enable the BOA to
adopt workable strategies to improve financial performance and profitability.
This
research will guide lending institutions towards better lending design, enhance
efficacy of institutional framework and be a handy guide in credit delivery
decisions.
The
study will provide information about the effect of gender and microcredit related
variables on welfare of smallholder cassava producers. The result of this
research is useful in terms of providing valuable information for policy
formulation and implementation. Beneficiaries and non-beneficiaries of
microcredit, Researchers and students will also benefit from the study as this
research work will add to available literature on microcredit and gender issues
as well as provide a stepping stone for further research.
Login To Comment