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ABSTRACT The study is on the microcredit use and performance of ginger processors and marketers in southeast Nigeria. The objectives achieved include, the socioeconomic characteristics of ginger processors and marketers, examination of the performance of the ginger processors and marketers, evaluation of the demand and supply of microcredit use of the ginger processors and marketers, estimation of the determinants of microcredit use among ginger processors and marketers, assessment of the determinants of performance of microcredit using and non using ginger processors and marketers, determination of the effect of microcredit use on performance of ginger processors and marketers, and assessment of the constraints of ginger processors and marketers to microcredit use. A multi-stage sampling procedure was used in selecting the locations and 576 respondents for the study. Primary data were collected using a well-structured questionnaire for both ginger processors and marketers differently. The data collected were analyzed using descriptive statistics, marketing costs and net returns analyses, marketing margin, and marketing efficiency models, multiple regression techniques, the Heckman selectivity model and simple regression analysis. The result shows that 71.43% and 79% (majority) of the ginger processors were females who used microcredit and non microcredit users respectively. Also, the result showed that the majority of ginger marketers were females (62.0% and 75.0% for non-microcredit and microcredit users respectively). The mean age of non-microcredit users and users of ginger processing were 43.50 and 43.38 years respectively, and the mean age of non-microcredit users and users of ginger marketing was 43.5 years and 43.71 years respectively. The net return of ginger processors of non microcredit using and using were N4, 805.7 and N13636.5respectively. However, for the marketers of non microcredit using and using were N 24002.23 and N49, 580 respectively. The regression results for the estimated microcredit demand and supply function of ginger processors using the two-stage least square regression (2SLS) procedure showed that the estimated F-Statistic were highly statistically significant at the 1% level of significance with a goodness of fit R2 values of 0.9753 and 0.9699 respectively. Similarly, the microcredit demand and supply functions of ginger marketers showed high R2 value of 0.9855 and 0.9964 respectively. The study recommended that microcredit facilities should be made available to both ginger processors and marketers at affordable interest rates. Also, establishment of more microcredit banks in the study area should be encouraged.
TABLE OF CONTENTS
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TABLE OF CONTENTS
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Page
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Title Page
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i
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Declaration
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iii
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Certification
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iv
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Dedication
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v
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Acknowledgements
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vi
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Table of
Contents
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vii
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List of
Tables
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xiii
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Abstract
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xiv
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CHAPTER 1: INTRODUCTION
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1.1
Background of the Study
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1
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1.2 Statement of the Problem
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5
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1.3 Objectives of the Study
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6
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1.4 Hypotheses of the Study
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7
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1.5 Justification of the Study
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8
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1.6 Limitation of the Study
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9
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CHAPTER 2: LITERATURE
REVIEW
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10
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2.1 Conceptual
Literature
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10
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2.1.1. Microcredit
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10
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2.1.2 Market and marketing
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11
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2.1.3 Market performance
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13
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2.1.4 Marketing margin
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13
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2.1.5 Marketing efficiency
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15
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2.2 Theoretical Literature
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16
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2.2.1 Theory of microcredit
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16
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2.2.2 Discrete choice theory
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18
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2.2.3 pecking order theory
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19
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2.2.4 Size reduction
theory
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19
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2.2.5 Theory of drying
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20
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2.2.6 Theory of digital
marketing
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21
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2.2.7 Theory of marketing
strategy
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23
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2.3. The Ginger Crop
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23
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2.3.1 Concept of ginger
processing
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25
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2.3.2 Value-added products from ginger
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27
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2.3.2.1 Dried ginger
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27
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2.3.2.2 Ginger powder
product
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27
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2.3.2.3 Ginger oil
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27
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2.3.2.4 Ginger oleoresin
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28
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2.3 .3 Uses of Ginger
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28
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2.4 Marketing of
Ginger
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30
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2.4.1 Ginger marketing
constraints
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30
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2.5 Empirical
Literature
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31
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2.5.1 Determinants of microcredit demand and supply
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31
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2.5.2 Effect of microcredit
use
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32
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2.6 Analytical framework
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34
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2.6.1
Descriptive statistics
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34
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2.6.2
Marketing margins
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35
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2.6.3
Marketing efficiency
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35
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2.6.3 Ordinary least squares (OLS)
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36
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2.6.4
Heckman selectivity model
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37
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CHAPTER 3:
METHODOLOGY
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40
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3.1 Study
Area
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40
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3.2 Sample selection
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41
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3.3 Data collection
procedure
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44
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3.4
Analytical procedure
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45
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CHAPTER 4: RESULTS AND DISCUSSION
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53
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4.1 The
Socio-Economic Characteristics of Ginger Processors and Marketers
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53
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4.1.1
Socio-economic characteristics of ginger processors in South-East Nigeria
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53
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4.1.2
Socio-economic characteristics of Ginger marketers in South-East Nigeria
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57
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4.2: Performance of Ginger Processors and
Ginger marketers
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62
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4.2.1:
Performance of ginger processors for non-microcredit users
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62
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4.2.2: Performance of ginger marketers for non-microcredit
users
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65
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4.3: Estimating the Demand
and Supply Functions for Microcredit Use of Ginger
Processors and Marketers.
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67
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4.3.1:
Estimated microcredit demand function for ginger processors
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67
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4.3.2:
Estimated microcredit supply function for ginger processors
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69
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4.3.3:
Estimated microcredit demand function for ginger marketers
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70
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4.3.4:
Estimated microcredit supply function of ginger marketers
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71
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4.4: Estimating the Determinants of Microcredit Use Among Ginger
Processors And
Marketers
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73
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4.4.1: The level of microcredit use among ginger processors
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73
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4.4.2:
The level of microcredit use among ginger marketers
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76
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4.5: 4.5: Performance
of Microcredit Users and Non Users for Ginger Processors And
Marketers
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80
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4.5:1: 4.5.1:Estimate the determinants of the performance of microcredit user among
ginger processors
using OLS regression
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80
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4.5:2: 4.5.2:Determinants of the performance
of non-microcredit use by ginger processors
using
OLS regression
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84
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4.5:3:Determinants of the performance of microcredit use by ginger marketers
using OLS regression
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86
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4.5:4: 4.5.4:Estimate the determinants of the performance of non-microcredit use by
ginger marketers
using OLS regression
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89
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4.6: Effect of Microcredit Use on the Performance of Ginger Processors and
Marketers
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93
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4.6.1: Effect of microcredit
use on the performance of ginger processors
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93
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4.6.2: Effect of microcredit use on the
performance of ginger marketers
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94
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4.7:
Constraints of Ginger Processors and Marketers on Use Of Microcredit
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96
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4.7.1:Constraints
of ginger processors on the use of microcredit
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96
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4.7.2:
Constraints of ginger marketers on the
use of microcredit
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97
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CHAPTER 5 SUMMARY, CONCLUSION AND RECOMMENDATIONS
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98
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5.1:
Summary
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98
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5.2:
Conclusion
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103
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5.3
Recommendations
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105
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5.4
Contribution to Knowledge
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106
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5.5
Suggestions for Further Research
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107
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REFERENCES
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108
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LIST OF TABLES
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Tables
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Page
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3.1: Sampled ginger processors and marketers
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44
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4.1: Socio-economic characteristics of ginger processors for
microcredit and
non microcredit users
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54
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4.2: Socio-economic characteristics of ginger marketers for
microcredit and
non microcredit users
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58
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4.3: Net returns of
ginger processors of non-microcredit users
(average quantity
per week)
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63
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4.4: Net returns of
ginger processors of microcredit users
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64
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4.5: Net returns of ginger marketers for non-microcredit users
(average quantity per
week)
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65
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4.6: Net returns of ginger marketers for microcredit users
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66
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4.7: Estimated microcredit demand function for ginger
processors: 2sls
procedure
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67
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4.8:Estimated microcredit demand function for ginger marketers:
2sls
procedure.
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69
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4.9:Estimated microcredit supply function use of ginger
processors: 2sls
procedure
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71
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4.10:Estimated microcredit supply function of ginger marketers:
2sls
procedure.
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72
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4.11:factors influencing the level of microcredit use among
ginger processors
(heckit results)
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74
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4.12:Factors influencing the level of microcredit use among
ginger marketers
(heckit results)
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77
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4.13: Determinants
of performance for microcredit use by ginger processors
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81
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4.14:Determinants of
performance of non-use of microcredit
by ginger processors
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84
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4.15: Results on
determinants of performance by ginger marketers of
microcredit use
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87
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4.16:Results on determinants of performance by ginger marketers of non-
microcredit
use
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90
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4.17:The simple regression result on the effect of microcredit
use on the
performance of ginger processors and marketers
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93
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4.18: Regression result for the effect of microcredit use on
performance of
ginger marketers
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95
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4.19:
Constraints militating against microcredit use of ginger processors
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96
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4.20:
Constraints militating against microcredit use of ginger marketers
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97
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CHAPTER
1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Ginger is grown in Nigeria in the Middle
Belt States. The crop is among the principal cash crops in Nigeria. Nigeria is
a major producer of the crop
and it is an important export commodity of Nigeria (Ojiako, Asumugha,
Ezedinma, and Uzokwe, 2007).
The most prominent states are Kaduna, Plateau, Niger, and Nassarawa States in
order of quantity produced. The production of ginger in Nigeria started
vigorously in 1927(Bernard, 2008). The plant is now cultivated in different
parts of Nigeria, though the significantly producing areas include Kaduna,
Nassarawa, Sokoto, Zamfara, Akwa-Ibom, Oyo, Abia, Imo and Lagos states. Kaduna
State stands as the utmost producer of the crop.
Southern
Kaduna remains the chief producers of ginger in Nigeria (Bernard, 2008).
Nigeria is placed first in the total number hectares available for ginger
cultivation, but her contribution to the overall ginger output in the world is
too low compared to other countries. This can be attributed to the fact that smallholder and traditional
farmers undertake most of the production without the basic production
techniques. Therefore are not adequately focused on profit-maximising motive
(FAO, 2010). Ginger powder is fast becoming a household kitchen item in
Nigeria. In the market, ginger is available in diverse forms; fresh ginger
rhizome, powder ginger, and dry ginger rhizome (Brian, 2014).
Ten
percentage of the ginger product is consumed locally as fresh ginger. The
remaining 90% is dried for export and consumed locally. Ezeagu in 2006 opined
that the 20% of the dried ginger was consumed locally and the remaining 80%
exported.
The crop is highly cherished in the
international market because of its aroma pungency and high oil and oleoresin
content called gingerin.
The
crop is an essential spice with real potential for employment creation and
income generation. It is a low-volume, high-value tropical crop. Ginger serves
as a preservative for its aroma and pungency in the foods and beverages
industry. The crop is among the oldest rhizomes widely domesticated with spice. In the Nigerian market,
ginger is well-known and it is greatly demanded, though it is quite expensive
(Brian, 2014).
However, local markets also exist, and
the domestic demand for ginger is increasing. Nigeria's ginger export is mainly
to four regional markets; Europe (51%); USA and Canada (29.5%), Asia (13%) and
Africa (0.5%) (Njoku, Mbanaso, and Asumugha, 1995). The world trade in ginger is
estimated at $190 million per year. The main competitors in ginger export are
China, Nigeria, and Thailand. In 2004, Nigeria's ginger export stood at
28323MT, valued at over $21.8 million (FAOSTAT data, 2014). Ginger is a
seasonal and perishable crop (USAID 2017). It is an export crop because of its
high demand in advanced medical and confectionery industries. Owing to the lack
of storage facilities, traders are forced to sell the product immediately after
collection from farmers. Similarly, there are limited collection Centres at
production sites so that there are difficulties in handling the product
correctly. There is also the absence of ginger washing facilities in
Nigeria, which has resulted in low price of the crop because of its dirty
appearances.
However, in some instances in the
developing countries like Nigeria and others in Africa and Eastern Europe,
efforts are made to ameliorate the challenges encountered by the farmers,
marketers, and processors of ginger such as lack of processing and storage
facilities. In developing
countries, numerous efforts are being made to establish modern financial
institutions to assist rural producers, processors, and marketers enhance their
productivity and income earning capacity (UNDP, 1999). Hence, rural credit
markets are established to mitigate the constraints encountered by households
in accessing funds to boost their business. Thus rural credit markets can be
described as an arrangement for the mobilisation and purveyance of finance for
investment in the rural sector (Thorn, 1976; Awosika and Nwoko, 1983).
Microcredit facilities are established to help these rural households.
Microcredit is an ideal tool to tackle poverty and improve food security.
Microcredit is aimed at placing credit
facilities at reasonable terms within easy reach of rural dwellers, increasing
the productivity of the rural sector, promoting and expanding the rural economy
in an orderly and efficient manner. Though, Microcredit is also known to
confiscate the poor's properties, especially on failure to re-pay (Sheremenko,
Escalante, and Florkowski, 2012).
In microcredit markets, there are smooth flows of funds from surplus spending
units to deficit spending units (Hoff and Stigliz, 1990; Von
Pischke, Adams and Donald, 1983).
Microcredit is branch of microfinance
which provides a broader range of financial services, especially
savings accounts, to the poor. Microcredit was established to reduce poverty,
encourage entrepreneurship, and uplift whole communities by extension.
Credit delivery is among the
critical roles of
microfinance banks, as the loans are used to expand existing businesses and in
some cases, to start new ones. Many traditional banks consequently introduced
microcredit regardless of the initial uncertainties. As of 2012, microcredit is
broadly used in developing countries. It has enormous potential for
poverty alleviation. Micro Credit is used to guarantee flexibility in resource
allocation to rural households. Also, reduce the effect of cash flow problems
and challenges (Bigsten, Collier, Dercon, Gauthier, Fafchamps, Gunning,
Zeufack, 2003).
Firms with access to microcredit funding
can build up inventories to avoid stocking elsewhere during crises, while the
accessibility of credit increases the growth potential of the surviving firms
during
periods of macroeconomic instability (Atieno, 2009). Microcredit helps
borrowers to level out processing in varying incomes. It provides resources for
investment, and the leeway to manage with unexpected expenditure outcome
(Atieno, 2009). Microcredit
helps the poor to get access to capital and escape persistent poverty (Ayayi,
2012; Valadez and Buskirk, 2012).
Over the years, credit has been a
significant policy instrument aimed at promoting production and the use of
modern technologies. However, the low acceptance rate which impedes this approach is
mainly caused by insufficient capital. Research findings show that improvement
in ginger production, processing, and marketing reduces poverty (Ewuziem,
Amadi, Onyenobi and Mohammed, 2011). A standard way to satisfy
the capital needs of processors and marketers is to provide microcredit with a
low-interest rate. Microcredit use should be encouraged to get the best in
production, processing, and marketing (FAOSTAT data, 2014).
Companies that lack access to bank
funding are more vulnerable to external shocks. The reason is that the lack of
microcredit remains a significant constraint for crop processing and Marketing
in developing economies (Nkurunziza, 2005). The inability of small-scale
enterprises to access microcredit has been observed as a factor hindering their
performance level (Hussien and Olaniran, 2011). This low performance has
attracted poverty, hunger, and unemployment in Nigeria (Wall, 1987). This study examined microcredit use and
performance of ginger processors and marketers in South East Nigeria.
1.2
STATEMENT OF PROBLEM
Ginger processors and marketers in
Nigeria operate in a subsistence economy with the use of local technology. The subsistence
economy resulted in the use of local knowledge with little commercialization.
Therefore improving ginger processing and marketing to commercial form is faced
with post-production challenges ranging from local processing techniques and
inadequate credit, which often results in low processing and poor ginger
marketing (Ezedinma, Okafor, Asumngha, and Nweke, 2006).
The transportation of fresh products to the processing site is the primary
cause of the high cost of materials in marketing.
Nigeria's agricultural growth is
constrained by inadequate infrastructures, weak institutions, and insufficient
technical support for commercialization and supply chain development. These
factors also affect the growth of ginger in the country. Also, the differences
in technology in no small degree, account for observed lower marketing activity
of the crop (Helberg and Tarp, 2002).
In general, the steady weak ginger growth
is not sufficient to boost overall per the capita income enabling economic
transformation in the country (CBS, 2004). Most ginger processors and marketers
have no access to agricultural loan facilities being disbursed.
Most times, the borrowers are not well
informed and such lack access to microcredit. The processors and marketers are
discouraged by other processors and marketers who are not well informed about
microcredit. According to Akinleye, Akanni and Sekumade (2009), some of the problems
encountered in microcredit use are the increasing incidence of loan defaults,
deliberate refusal to pay and the inability of processors and marketers to
assess loan requirements accurately. This may cause processors and marketers to
receive inadequate or excessive loans. Participatory banks in the credit market
do not cooperate fully in lending to processors or marketers. Because of the
soaring cost of processing loans relative to the actual loans and the high
default, banks fault the processors or marketers for forwarding incomplete
application forms. In situations where loans are available, it gets to
the borrowers too late and hence do not achieve the purpose for which it was
intended. It is general knowledge that most people, mainly in the rural areas, do not have lucid
titles to their land, which serve as collateral for a loan under the scheme
(Okorie, 1998). Oguoma (2002) noted a low turnout of processors and marketers
in most states of the federation in patronizing the scheme due to lack of
awareness.
Majority of poor processors and marketers have continued
to face limited access to microcredit services, and these services are often at
a very high cost (Okojie, Monye – Emina, Eghafona, Osaghae
and Ehiakhamen, 2010 and Phillip, Nkonya, Pender, and Oni, 2009).
Based on this standpoint, this study examines all the factors which
affect the access to microcredit by ginger processors and marketers in
southeast Nigeria. This study bridged the gap by determining the determinants
of microcredit use among ginger processors and marketers in southeast Nigeria. The assessment of the
perceptions of ginger processors and marketers to microcredit use is an
essential factor since the processors and marketers must be adequately informed
on the benefits of microcredit use.
1.3
OBJECTIVES OF THE STUDY
The broad objective of this study was to analyse
microcredit use and performance of ginger processors and marketers in South-East,
Nigeria.
The specific objectives were to:
(1)
describe
the socioeconomic characteristics of ginger processors and marketers in micro-credit use;
(2) examine the performance of the ginger
processors and marketers in micro-credit use;
(3) evaluate the demand and
supply of microcredit use of
the ginger processors and marketers;
(4) estimate
the determinants of microcredit use among ginger processors and marketers;
(5) assess the determinants of performance of
microcredit using and non-using ginger processors and marketers;
(6) determine
the effect of microcredit use on performance of ginger processors and Marketers and
(7) identify
the constraints of ginger processors and marketers to microcredit use;
1.4
HYPOTHESES OF THE STUDY
The following hypotheses were tested in
the study:
H1: The performance of ginger
processors and marketers in microcredit demand is positively influenced by
gender, level of educational, extension visit, experience, household
size, membership of cooperatives, access to credit and negatively influenced by
age, interest rate and distance to the source of credit.
H2:
The performance of ginger processors and marketers in microcredit use is
positively influenced by level of education, extension visit, experience,
membership of cooperatives, income and negatively influenced by age, gender,
transportation cost, storage cost, purchase price and distance to the source of
credit.
H3:
The level of marketing efficiency among the ginger processors and marketers is
positively influenced by gender, level of education, extension visit,
experience, household size, membership of cooperatives and access to
microcredit and negatively influenced by age, interest rate and distance to the
source of microcredit.
1.5
JUSTIFICATION OF THE STUDY
This study improved our understanding of
all the complexities affecting the microcredit use and the performance of
ginger processors and marketers in South East Nigeria.
The study helped to determine the volume
and the determinants of microcredit demand by the ginger processors and marketers.
The study also helped to determine the performance of microcredit use and non-use
by ginger processors and marketers. The results obtained from this study helped
to educate processors and marketers on the merits and demerits of accessing
microcredit. This study provided database information on the volume,
determinants, and performance of microcredit use and non-use by ginger
processors and marketers.
However, the consumers benefited from the
outcome of the study as the cost of the final product was affordable. Also,
individuals who want to participate in the business were well informed. The
study helped to provide information on the determinants of microcredit demand
among processors and marketers in the study area. This information helped the
ginger processors and marketers to take a good decision regarding the business.
The assessment and perceptions of ginger processors and marketers to
microcredit uncovered the ideas of ginger processors and marketers towards
microcredit.
This study provided information on the
profitability of the trade and the availability of credit to the processors and
marketers. To society, this research created awareness of microcredit services
such as economic activities, increase employment opportunities, wealth
creation, growth, and development. Finally, the salient findings of the study
made the processors and marketers more oriented in the trade. This study
contributed to the development and growth of ginger processors and marketers in
Nigeria.
1.6
LIMITATIONS OF THE STUDY
The researcher encountered some difficulties during data
collection, such as the poor record keeping habit among the respondents. The
accessibility of the ginger processors and marketers was not easy. Also, some
of the respondents were very aggressive and demanding money for any information
released regarding the processing and marketing of ginger
in the study area. These
limitations were reduced by the ADP staff in the study areas through adequate
awareness on the benefits of the study. Some members of the cooperatives also
helped by educating their members and solicited for their support.
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