Abstract
This paper analyses the factors determining the demand for and supply of agricultural credit (loans) among small-scale farmers in south-western Nigeria. Empirical data were obtained from 270 farmers who used credit. The data were analysed using descriptive statistics and statistical models. Analysis revealed that farmers who used credit were younger (average: 47 years old), and that cultivated farm sizes (average: 3.8 ha) were larger than the national average. The statistical models showed that the interest rate, farm expenditure, the amount borrowed from alternative sources, farm size and savings were the main determinants of credit demand, while interest rates charged, the level of savings of respondents, the amount of loan demanded and the proportion of previous loans repaid were the major determinants of credit supply. In order to improve the agricultural sector, formal lending institutions should target younger farmers, including women, use group and social assets as collateral rather than physical assets, charge commercial interest rates, mobilize savings through their rural outposts and give medium-term rather than short-term loans.
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