CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Agriculture, which is the cultivation of crops and rearing of livestock for the satisfaction of human needs, is the most important sector towards the development of any nation [CBN, 2013]. The greatest avenue for employment, income and food for Nigerian populace (general public) is through Agriculture. The agricultural sector has been an important component of the Nigerian economy with peasant farmers producing over 90% of available food in the country and 70% of the labor force relying on these sectors [Amao et al, 2013]. The Agriculture sector lies in the hands of small scale farmers, whose expansion in terms of provision of scale of production is low due to low inputs and low income. The Nigerian economy is declining particularly in the area of agricultural productivity because of lack of credit facilities, which prevented many farmers from adopting improved practices, since some of them lack the collateral for secure loan or credit from financial institutions [Asogwa et al, 2014]. Informal credits have been gaining increasing attention in literature with reports of popularity of informal lenders among the rural poor who in some cases see them as the only means of financing their farm and other business activities. Informal financial institutions are well patronized in Nigeria. Writing on the popularity of fixed and rotating savings and credit associations (ROSCAs), Seibel (2010), notes that there may be only few Nigerians who are not a member in one or several of them. Virtually, all ethnic group has its own institutions and proper names (adashi, in Hausa, perhaps the best-known besides esusu); and most adults are members in one or several (Nwankwo 2013). The money lender is no less important in the informal credit arrangements in rural communities, in spite of the fact that he may not be the most desired person in the community because of his antecedents. In spite of his usurious rates, Ijere (2015) affirms that he is patronized by many in Nigeria’s rural areas because his timeliness in credit disbursement, a broader interpretation of farm credit to include the farm and home financing and expeditious enforcement of loan terms to ensure enforcement. Khandker and Faruqee (2013) noted that informal credit is largely used for consumption and it’s not large enough to spur investment and growth. Credit in agriculture is very important as technical inputs can be purchased and used by farmers only if sufficient money (funds) is available with farmers and most farmers suffer from the problem of inadequate financial state. This situation leads to borrowing from an easy and comfortable source. Up until 1935 professional money lenders were the only source of credit to agriculture.
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