An economic analysis of participation in credit market and credit rationing among farmers in Kano State, Nigeria

Apart from providing fertilizer and machineries, agricultural credit provides access to all other resources, which may lead to remarkable improvement in output. However, due to lack of farm credit, agricultural production particularly in Kano-State, Nigeria does not significantly improve over the years. Therefore, this study aims at estimating the demographic and socio-economic indicators that are responsible for influencing farmers’ decision to participate in credit market and factors that constraint them from accessing the farm credit. Micro data is used in this study involving 835 households and 45 microfinance banks, respectively. The result of the logistic model reveals that commercial farming, credit information, neighbourhood credit participation, traditional title and possession of radio and television relate positively to the credit market participation whereas a negative impact is noticed on the application of traditional tools. Similarly, results from the discrete choice models show that farmers who are either being engaged in subsistence farming or trading have a significant effect on the choice of credit market and credit rationing with the greatest impacts found on the farm profit and farmers’ location. Moreover, the result of the partial proportional odds model indicates that the amount of credit received by farmers shows a positive relationship on irrigation, vehicle, farm record, number of creditors, financial literacy and location, albeit negatively related to subsistence farming. Even though proximity to lenders seems to play a role in credit supply equation, creditworthiness in general and its staff in particular are even more important. In conclusion, this research attests that poorer farmers are more likely to be excluded from the credit market than better‐off households. Consequently, the finding in the credit market model recommends that there is need to build trust, encourage commercial farming, apply modern farming tools, strengthen property rights and increase financial literacy among farmer