ABSTRACT
This study was carried out to examine gender differentials in financing agribusiness entrepreneurs in South-eastern Nigeria. The study specifically evaluated the selected banks credit market with emphasis on lender-borrower relationships, credit security and associated risks as well as credit-induced performances by agribusiness entrepreneurs – all examined along gender lines. The data for the study were collected from both primary and secondary sources, from both the borrowers and lending institutions comprising of male and female agribusiness entrepreneurs. Data were analyzed using simple descriptive statistics (tables, means, frequencies and charts) as well as inferential statistical tools (bivariate probit, multinomial logit, multiple regression and correlation models).Result showed that male-entrepreneurs received more loans than their female counterparts and with respect to the amount of loan received using the different selected banks loan type, that male agribusiness entrepreneurs were better positioned to receive larger loans without collateral than the female agribusiness entrepreneurs; a strong indication of gender discrimination in loan access. Estimates further showed that female agribusiness entrepreneurs firms have a higher probability of having to pledge guarantees than male firms. Further, smaller sized female firms are even more disadvantaged in credit access than large-sized female firms and inadequate collateral affected loan access mostly the female entrepreneurs. The chow test result showed significant and statistical difference in the credit demand, access to loan, and performance of the Agribusiness entrepreneurs was in favour of male entrepreneurs at 1% probability level. In conclusion, lender-borrower relationships, credit security and associated risks as well as credit-induced performances by agribusiness entrepreneurs. This study recommends that differences by gender in lending patterns for these existing businesses must be addressed as an issue of credit market imperfections. Credit institutions should give due consideration to policy conditions that favour lower interest rate during policy formulation in such a way that it will be easier to get loans without stringent bureaucratic bottle-necks for both gender. In order to improve female-entrepreneurs’ access to bank loans, female firms should pursue a strategy oriented to expanding their size.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Charts xi
Abstract xii
CHAPTER
1:
INTRODUCTION 1
1.1 Background
of the Study 2
1.2 Problem Statement 4
1.3 Objectives of the Study 9
1.4 Research Hypotheses 9
1.5 Justification
of the Study 10
CHAPTER 2: LITERATURE REVIEW 13
2.1 Conceptual Framework 13
2.1.1
The concept of gender 13
2.1.2
Concept of entrepreneurship and gender 13
2.1.3
Concept of credit 16
2.1.4 Sources
of credit to agro-based enterprises 19
2.1.5 Gender
position in Nigeria’s agricultural sector 21
2.1.6 Gender
issues in agriculture 19
2.1.7 Gender and access to financial services 23
2.1.8 Banks as financial institution in Nigeria 25
2.1.9 The role of banks in economic development 26
2.1.10 Banks lending conditions and considerations 29
2.1.11 The principles of the 5Cs of lending 30
2.2 Theoretical Framework 31
2.2.1 Entrepreneurship and gender roles theory 31
2.2.2 Gender roles theory 32
2.2.3 Theoretical issues of credit market 34
2.2.4 Theory of credit rationing and constraint 35
2.2.5 Theory of credit effect 36
2.3 Review of Empirical Studies 37
2.3.1
Entrepreneurship and gender 37
2.3.2
Women and the credit market 41
2.3.3 Factors behind the perceived difficulties in
accessing finance 46
2.3.3.1 Demand side, self-selected avoidance 46
2.3.3.2 Human capital constraints 47
2.3.3.3 Lack of confidence 47
2.3.3.4 Network deficiencies 47
2.3.4 Financial barriers to female entrepreneurs 48
2.4 Analytical Framework 50
2.4.1 The regression model 51
2.4.2 Pearson’s product moment bivariate
correlation coefficient 51
2.4.3
Financial ratio 52
CHAPTER 3: METHODOLGY 54
3.1 Study Area 54
3.2 Sampling Procedure 54
3.3 Method
of Data Collection 56
3.4 Model
Specification and Empirical Strategy 57
CHAPTER 4: RESULTS AND DISCUSSION 66
4.1 Agribusiness
Entrepreneur’s Firms Characteristics 66
4.2
Agribusiness Entrepreneur’s Loan Characteristics 69
4.3 Sector-Credit
Request Distribution of the Respondents 74
4.4 Determinants of Credit Demanded by
Agribusiness Entrepreneurs using Regression 77
4.5 The
Determinants of Loan Access by Gender among the Selected Banks 83
4.6 Effect of Gender on Securing Guarantees
and Collateral to Access Credit
from
the Selected Banks in the Study Area 88
4.7 Entrepreneurs
Credit Risk Attitude 92
4.8 The
Determinant Factors Affecting the Performance of both Male and
Female
Agribusiness Entrepreneur 99
4.8.1 Performance analysis 99
4.8.2 Factors
affecting the profit performance of agribusiness entrepreneurs 101
4.9 Chow Test of Differences in Credit Demand,
Credit Access and Profit
Performance of Agribusiness Entrepreneurs 106
4.10 Hypothesis Testing 108
CHAPTER 5:
SUMMARY, CONCLUSION AND RECOMMENDATIONS 111
5.1 Summary 111
5.2 Conclusion 114
5.3 Recommendations 114
References 117
LIST OF TABLES
4.1: Amount requested and amount granted. 74
4.2: Amount of loan granted to agribusiness
entrepreneurs according to
their
sectors 75
4.3: Agribusiness entrepreneurs loan
distribution by type of guarantee and
gender 76
4.4: Determinants of credit demanded by
agribusiness entrepreneurs 78
4.5: Determinant of loan access by the selected
banks 84
4.6: Effect of gender on guarantees and
collateral 89
4.7: Multinomial
logistic regression estimates of agribusiness entrepreneurs’
credit risk attitude 94
4.8: Agribusiness
entrepreneurs’ performance analysis 100
4.9: OLS
estimates of entrepreneurs’ profit performance determinants 102
4.10: Test of differences in credit demand, credit access and profit
performance
of agribusiness entrepreneurs 107
LIST OF CHARTS
4.1: Sales 66
4.2: Agribusiness entrepreneurs’ business type 67
4.3:
Sector of activities 68
4.4: Number
of loan applications 69
4.5: Loan
request in naira by agribusiness entrepreneurs 70
4.6: Amount
of loan granted to the agribusiness entrepreneurs 71
4.7 Type of guarantee posted on loans 72
4.8 Average on sales, loan requested and
granted 73
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Gender can be defined as the economic, social,
cultural characteristics and possibilities of being male or female (UN-Habitat,
2003). Generally, in decision making women and men are different in terms of
their normal activities and undertakings in the area of access to and control
over resources. Gender is all about having full knowledge of the roles and
responsibility of both males and females. UN-Habitat (2003) states that gender
analysis is important and most considered equality in the areas of control over
access to finance, land ownership, equalities in gender participation and roles
in selection making board and equalities in representation. Gender
entails social, cultural, and psychological traits which constantly changes and
dictates how power is used and distributed in all aspects of lives. Gender also
refers to the economic, social, cultural features and possibilities related to
being male or female at a particular time. Socio-culturally man is known to
have masculine characteristics and woman feminine characteristics; this has
brought about a lot of distinction among the male and the female gender in the
form of, aptitudes, abilities, desires, personality traits, roles,
responsibilities, opportunities, and behavioural patterns (WHO, 2001).
According
to Orhungur, Agbe and Egbe (2003)
gender is what the community or society at large expect from someone due to the
fact that the individual is either male or female. Additionally it can also be
seen as a characteristics demonstrated by a person irrespective of the person’s
biological sex. Gender relations are subject to reconstitution; is not only
viewed as immutable however as historic and socio-cultural quality of a person
or persons. In Nigeria gender
profiling points at gender imbalance, gender inequality, gender bias and gender
discrimination, these simply means that males are given preferential treatment
at the expense of their female counter parts (Okebukola, 2008).
The
role of gender in access to finance has been the subject of extensive research
and debate over the years, in the other direction, empowering females is
necessary because it brings about economic development in every part of the
world (Ahl, 2004; Carter, Anderson and Shaw 2001; Duchenaut, 1997; Gatewood,
Carter, Brush, Greene and Hart, 2003; Leitch and Hill, 2005). Looking at the
features of the funding environment and the qualities of the ventures
established by female entrepreneurs, much of the debate on gender and finance
has been concerned with access to financial loan and with the role of the banks in perpetuating
gender-based differences in access to finance (Buttner and Rosen, 1992; Carter
and Rosa, 1998; Coleman, 2002; Fay and Williams, 1993; MeKechnie, Ennew and Read,
1998; Read, 1998; Riding and Swift, 1990; Verhuel and Thurik, 2000).
Lending
is a necessary assignment of financial institutions because of its impact on
monetary increase and business development of the nation (Okwo, Mbajiaku and Ugwunta, 2012). It
is also a major source of revenue to banks. The fundamental goals of financial
institutions in imparting this service are to enhance financial increase, banks
profitability and liquidity to the economy. Financial institutions are very
important entities in a nation’s economy which exist with the objectives to furnish
monetary services and products to various stakeholders in the economy. They
provide the services of intermediaries in financial markets. Their duties as financial
intermediaries are in these three main areas; depository, contractual and
investment functions. The CBN which is a heavily regulated body ensures that
they perform their functions accordingly because of the direct effect on the
achievement of general financial increase and improvement in a nation financial
system (Ezike, 2015). Bank credit involves financing economic activities in
sectors like; manufacturing, production, commerce and many others through the
provision of loans and overdrafts by banks (Nwoaru and Okorontah, 2014). The
role of bank loan in financial development has been accepted and productive as
credits are obtained by the various economic agents to ensure investment
operating expenses and at the long run bring about economic development. Ademu
(2006) said that availability of credit to a reasonable extent with adequate
involvement of the price system is one of the ways to generate self employment
opportunities. This is because credit helps to generate and maintain a
reasonable business size, expand the business and at the long run bring about
efficiency.
In
Nigeria, governments had recognized the importance of credit to agribusiness
entrepreneurs and have formulated credit policies and programmes that favour
agriculture, also created institutions which ensure that agribusiness
entrepreneurs acquire credit. The Agricultural credit assurance scheme is among
the policy interventions for agricultural financing in the country. They are
created especially for agricultural support for farmers and agribusiness
entrepreneurs in Nigeria (Akpan, Obot and Ubon 2012). These interventions by
the government were the needed solution because of the poor attention formal
financial institutions gave to credit supply in the agricultural sector. Below
are three (3) of the considered Banks for the study because of their exceptional
nature of supporting agribusiness entrepreneurs within the study area.
First
Bank Nigeria PLC, this financial institution highly prioritised the
agricultural sector in the Nigeria economy and has financed various types of
assets for the establishment, expansion and modernization of various
agricultural enterprises (FBN, 2017). The second bank is Union bank Nigeria
PLC. Union bank remain committed to supporting the Nigerian agricultural
sector; they have won several awards because of their exceptional credit
facilities to farmers in Nigeria.
The
recent recognition given to the bank in form of awards are as follows; Business
Day Award for “best bank to support Nigeria's SMEs in 2015, Central Bank of
Nigeria (CBN) award as the best bank in Agricultural Credit Insurance Scheme Fund
in Nigeria in 2006 and CBN Award of the most Agricultural friendly bank
2014,2015 and 2016 (UBN, 2017). Finally, Bank of Agriculture Nigeria PLC a
specialized bank which provides credits to finance micro agricultural
activities, SMEs and larger agribusiness investment projects throughout the
Agriculture value chain (BOA, 2017).
1.2 PROBLEM
STATEMENT
Entrepreneurship
is widely considered as a driving force of economic growth, job creation and
promotion of innovation, hence an important focus of economic policies.
Unfortunately, the access to finance is mentioned as one of the significant
obstacle (Hughes and Storey, 1994) and in the case of female entrepreneurs, the
situation is even worse. Implementing equal opportunities for male and female
and for gender equality is an important issue in the global economy. According
to Carter (2000) academic literature has witnessed surge in interest of female
entrepreneurship in various countries around the world. Gender and Agriculture,
a sourcebook produced by the World Bank, FAO and IFAD (2009), warned that the failure
to recognize the roles, differences and inequities [between male and female]
poses a serious threat to the effectiveness of the agricultural development agenda.
Similarly, the International Fund for Agricultural Development (IFAD) stated
that although female agribusiness entrepreneurs are primary contributors to the
world’s food production and security, they are “frequently underestimated and
overlooked in development strategies” (UN News Center, 2010).
Consequently
female entrepreneurs are now seen to attract considerable amount of attention
as a subject of academic debate in their own right (Carter, Anderson and Shaw, 2001).
According to Verheal, Van stel and Thurik (2006), the interest is attributable
to the fact that female entrepreneurs are now considered important forces in
economic development of their nations. Despite the various contribution and
efforts by the female entrepreneurs studies reveal that there are some
constraints militating against female entrepreneurs in terms of financing their
business in south east Nigeria, Nigeria, African and the world at large. Gender
inequality in entrepreneurship is a complex phenomenon, encompassing all the
cultural and economic barriers that generate differences in business ownership
rates and the entrepreneurial “success” of male and female entrepreneurs
(Piacentini, 2013).
Females
are much less likely than males to start a business and when they do their enterprises
are often small and operate with little capital. As entrepreneurs, the female gender
are on average less endowed than the male gender with key resources such as
access to business networks, financial capital and management experience
(Piacentini, 2013). Financial obstacles
significantly contribute to the explanation of why female agribusiness
entrepreneurs are smaller sized and have lower economic performance than their
male counterpart. Access to credit is critical in starting a new business and
its performance at the long run.
In
Nigeria, one of the main objectives of Nigerian Agricultural policies is to
promote self-sufficient agribusiness entrepreneurs. In pursuance to these
objectives; credit schemes are put in place to increase these areas. The Nigeria
government has created specialized credit institution such as Bank of
Agriculture to cater for the credit needs in the agricultural sector (Oladeeboo,
2003) Government has also mandated the commercial banks in Nigeria to give
credit facilities to agribusiness entrepreneurs (Oladeeboo and Oladeeboo,
2008). Financial institution are in existence for profit making, one of the
reasons for the reluctance of banks to extend credit to female entrepreneur is
that they usually request for small loan which attract more administrative
costs on the part of the lending institution (FAO, 2004). Although female owned
business may structurally need fewer financial funds than male own business,
female entrepreneurs are more reliable in paying back loans than their male counterparts
because they typically operate in less risky sectors (Coin, 2011).
Most
researchers have concluded that structural dissimilarities (business, size, age
and sector) explain most of the gender differences in funding profiles from
financial institutions (Read 1998).
Nevertheless, studies that have systematically compared matched pairs of male
and female owned business of identical age, size and sector report the presence
of residual funding differences (Carter and Rosa, 1998; Verheul and Thurik, 2001
and Brush et al 2002). Attempt to
explain residual differences have focused on bank procedures that may be of
disadvantage to female entrepreneurs. Some structural barriers could prevent
female entrepreneurs from fully utilizing the formal finance channels to
improve their business (Marlow and Swail, 2014).
Gender
difference in the access to credit could also be due to differences in demand.
Watson and Robison (2003) argued that female entrepreneurs shows higher risk
aversion than male entrepreneurs. Therefore there is a lower propensity to seek
indebtedness (Carter and Shaw 2006). Female entrepreneurs are reluctant to
assume a position of debt. Orser and Riding (2006) argued that the 5Cs of bank
lending (character, capacity, capital, collateral and condition) were
subjectively applied to the detriment of female entrepreneurs. Female
entrepreneurs face tougher credit availability even though they do not pay
higher interest rate (Bellucci, Borisonv and Zazzaro, 2010). Female entrepreneurs prefer to deliberate and
strategise decision to opt for smaller business that requires less debt and
equity financing (Marlow and Swail 2014). According to Becker (1971) and Bradford (2002)
banks mainly discriminate; by imposing heavier pre-contractual conditions on female
firms than male firms; and by demanding higher credit worthiness from female
entrepreneurs than from their male counterparts before granting them loans.
Some
other barriers faced by female entrepreneurs are the transaction cost of
credit, well defined properly rights and being poorer than the male
entrepreneurs (World Bank, 2008). Even though the male gender also face these
barriers those faced by the females are more acute. In case where female have
access to credit, the amount granted is usually very small and repayment
condition are not the very suitable. These financial institutions usually give
secured loans and these loans required providing collateral (fixed assets) and
personal guarantees.
In
Nigeria, law and customs in most part of south-east Nigeria in several
instances have tended to perpetuate gender discrimination in society by denying
females some fundamental rights as inheritance of landed property and equal
access to credit facilities (Nwosu, 2012). Alston (1994) affirmed that the
problems female entrepreneurs have in attaining land ownership in Africa are
monumental. This has denied them access to credit facilities because it is
required as collateral for loan. Discriminatory laws and practices are still
widespread most especially in terms of inheritance rights such as the involving
access to and ownership of land. Banks
insist on adequate collateral before credits are released to recipients.
However some female agribusiness entrepreneurs do not have collateral but needs
loan for investment in various businesses (Adinya, 1995). Access to ownership
of capital and property is unevenly distributed among male and female
entrepreneurs in the south eastern Nigeria. Consequently, female entrepreneurs
have a lesser possibility to mortgage and thereby to acquire debt capital for
their business is difficult.
Poor
access to credit facilities prevents female entrepreneurs from purchasing the
needed inputs for the purpose of their business growth. This is one of the
major factors impeding the performance of agribusiness entrepreneurs in south eastern
Nigeria, issues on gender access to finance have become at increasing concern
to government and policy makers across African and many developing nations. Supporting
female entrepreneurship is not just about increasing the number of female-owned
firms, but also about raising their performance and growth potential. Evidence
on gaps in sales and profits between female and male-owned firms suggests that
many female entrepreneurs are not yet able to fulfil their productive and
innovative potential (Piacentini, 2013).
However, designing support policies is not
straightforward. Various national, state and local programmes offer loans at
preferential rates, preferential treatments in public procurement and
privileged access to training to nascent or established female entrepreneurs.
The economy-wide returns of these targeted policies are difficult to quantify
given the scarcity of monitoring and evaluation efforts.
The study investigated
the following questions:
i.
What
are the determinants of credit demand by agribusiness entrepreneurs?
ii.
What
are the determinants of access to credit by male and female agribusiness
entrepreneurs from the selected banks in the study area?
iii.
What
impact does gender have on securing the collateral and guarantees to access
credit in the study area?
iv.
What
are the credit risk attitudes of male and female entrepreneurs from formal
finance sources?
v.
What
impact does gender have on securing the collateral and guarantees to access
credit in the study area?
vi.
What
are the factors affecting profit performance of agribusiness entrepreneurs in
the study area.
1.3 OBJECTIVES OF THE STUDY
The broad objective of
this study was to analyze gender differentials in financing agribusiness
entrepreneurs in south eastern, Nigeria. The specific objectives are to:
i.
analyze
the determinants of credit demand by agribusiness entrepreneurs in the study
area;
ii.
analyze
the determinants of loan access of both male and female agribusiness entrepreneurs
from the selected banks in the study area;
iii.
ascertain
the effect of gender on securing the collateral and guarantees to access credit
in the study area;
iv.
examine
male and female entrepreneurs attitude towards credit risk from formal finance
sources;
v.
determine
the factors affecting profit performance of agribusiness entrepreneur in the study area.
1.4 RESEARCH
HYPOTHESES
The
following hypotheses further guided the study.
Ho1 Financing agribusiness entrepreneurs in
south eastern states of Nigeria differ significantly across gender
and financial institutions
Ho2 Loan access is not positively influenced
by business type, age of firm, size of firm, and length of lending
relationship. Collateral and personal guarantee are not negatively related to
loan access.
Ho3 Credit risk attitude (risk seeking) is not
positively related to business experience, cooperatives membership, length of
lending relationship and not negatively related to age of manager, number of
loan applications and entrepreneur’s income level across gender.
Ho4 Net profit of the entrepreneur is not
positively influenced by number of employees, productivity ratio, credit
access, cooperative membership, age of firm and firm size are not negatively
related to age of entrepreneur and capital.
Ho5 Agribusiness entrepreneurs were not
profitable in there different sectors of activities across gender.
1.5 JUSTIFICATION
OF THE STUDY
Gender
inequalities adversely affect the outcomes of trade and macroeconomic policy
reforms and their ability to translate incentives into economic development.
Nigeria still falls short of the desired result of giving males and females the
equal opportunities and equal access to opportunities to advance socially,
economically and politically. Evidence abounds of several forms of gender-based
discrimination in gender relations in Nigeria. Gender-based division of labour,
disparities between male and female access to power and resources, and gender
bias in rights and entitlements remain pervasive in Nigeria (National Gender
Policy, 2006). The 1999 Constitution
of Nigeria clearly stipulates gender equality, but customary and religious laws
continue to restrict the female gender’s rights. The disparities between
Nigerian women and men in terms of political, social, educational and economic
achievements cannot be separated from some problems which hinder parity between
the two groups. Such problems include low participation of women in politics,
limited rights in terms of access to resources (land ownership and credit) and
opportunities (education, training, occupation), especially for the
predominantly Muslim northern women. There are also more than 320 ethnic groups
with various customs, with many, constraining the female gender's full
participation in society thereby exacerbating poverty for instance (Okoyeuzu,
Obiamaka and Onwumere, 2012). This research is very necessary because gender
equity and female empowerment have continued to be central themes in global
treaties, covenants and declarations. Promotion of gender equity is now
globally accepted as a development strategy for reducing poverty levels among
the female and the male gender. The attainment of gender equity in the
agricultural sector is not only seen as an end in itself
and human right use but prerequisite for the achievement of suitable
development (National Gender policy, 2006).
Moreover, this study seeks to add to
the growing body of knowledge on the characteristics of female agribusiness entrepreneurs
and their motivation for business ownership; it also seeks to concentrate on
financial constraints inhibiting female agribusiness entrepreneurs in
participation in business. This study just like other related studies on gender,
through proper analysis will identify if there is any form of discrimination
based on gender in financing agribusiness entrepreneurs in south eastern Nigeria.
The result of this study will be beneficial to the following group;
The agribusiness entrepreneurs:
It will enlighten them on how banks create credit facilities and the various
channels through which funds can be borrowed from the banks irrespective of the
gender of the borrower. This will also enlighten them on the criteria that will
enable them qualify for bank loan and how to avoid loan denial from these
financial institutions.
The monetary authorities: This
study could guide monetary authorities in making favourable loan polices that
could benefit all the agribusiness entrepreneurs in form of specialized loan
with reasonable low interest and less pre contractual conditions. It will also helps
monetary authorities understand the impact of banking policies that will encourage
Agribusiness entrepreneurs succeed in their business and promoting economic
stability in the long run.
The female entrepreneurs:
This study will help identify the areas in bank lending that are disadvantaged
to the female agribusiness entrepreneurs and will also recommend a lasting
solution to the problems. This study will also address the aspect of financial
risk management which is of more important to the female agribusiness
entrepreneurs because of their risk avoidance nature.
Other researchers:
A successful completion of the study will add to existing body of knowledge and
serve as a reference material to other researchers.
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