1.1 Introduction
Money deposit banks, also referred to as commercial banks, are financial institutions that accept deposits from the public and provide loans to individuals, businesses, and organizations for various economic activities (Sanusi, 2010). They play a central role in the financial intermediation process by mobilizing savings and channeling funds into productive sectors of the economy, including agriculture. Agricultural development, on the other hand, refers to the systematic improvement of farming activities aimed at increasing productivity, enhancing food security, and promoting sustainable economic growth (Olayemi, 2017). It involves not only crop and livestock production but also the adoption of modern farming techniques, and access to finance.
In Nigeria, agriculture remains a vital sector, contributing significantly to employment, rural development, and the nation’s gross domestic product (GDP) (National Bureau of Statistics, 2021). As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, research questions, Limitation of the study and Definition of terms.
1.2 Background of Study
Agriculture has historically been the backbone of Nigeria’s economy, providing employment for a large segment of the population and contributing significantly to the country’s GDP. According to Olayemi (2017), agriculture remains crucial for ensuring food security, generating income, and promoting rural development. Despite its importance, the sector faces persistent challenges, particularly in accessing adequate financial support to enhance productivity and modernize farming practices.
Money deposit banks, as financial intermediaries, are expected to mobilize savings and provide credit to productive sectors, including agriculture. Adegbite (2019) reported that the flow of banking credit to agriculture in Nigeria is disproportionately low, with many farmers unable to secure loans due to stringent collateral requirements, high interest rates, and complex loan procedures. On the other hand, Oluwatayo and Bankole (2020) asserted that some banks have designed agricultural financing schemes to support farmers, but the effectiveness of these programs is constrained by poor monitoring, inadequate risk assessment, and lack of products tailored to the needs of small-scale and medium-scale farmers. Furthermore, Eze and Chukwu (2018) stated that limited access to banking credit affects the adoption of modern farming techniques, purchase of quality seeds and fertilizers, and acquisition of farm machinery. On the other hand, some scholars contend that enhancing financial literacy among farmers and improving the responsiveness of banks to agricultural credit demands could significantly stimulate growth in the sector (Sanusi, 2010).
The Nigerian government has introduced policies and initiatives to encourage agricultural financing, such as the Anchor Borrowers’ Programme and other bank-government partnerships. However, Adegbite (2019) affirmed that these interventions are often hampered by poor implementation and limited collaboration between banks and agricultural stakeholders. Consequently, there is a need to critically examine the role of money deposit banks in financing agriculture to determine how effectively they support development and to identify strategies for improvement. This study is set against the backdrop of the persistent financial challenges in agriculture, the role of banks in providing credit, and the need to enhance the effectiveness of banking interventions to stimulate sustainable agricultural development in Nigeria.
1.3 Statement of Problems
Investigation revealed that agriculture remains a critical sector in Nigeria’s economy, providing employment for a significant portion of the population and contributing substantially to national GDP. Money deposit banks are expected to play a pivotal role in providing the necessary funding to stimulate agricultural growth. However, evidence shows that the level of credit provided by banks to the agricultural sector is disproportionately low compared to other sectors of the economy (Adegbite, 2019).
Additionally, while some banks have introduced agricultural financing schemes aimed at supporting farmers, the effectiveness of these programs is often limited by inadequate monitoring, and poor risk assessment that address the unique needs of small-scale and medium-scale farmers (Oluwatayo et al., 2020).
Furthermore, the inconsistent flow of credit to agriculture affects not only production capacity but also the adoption of modern farming techniques, purchase of improved seeds, fertilizers, and farm machinery, which are essential for enhancing productivity and competitiveness in the sector. The result is a persistent reliance on subsistence farming practices, reduced output, and low income levels for farmers, which ultimately impede the sector’s contribution to national development (Eze & Chukwu, 2018). It is against this backdrop that this study seeks to investigate the role of money deposit banks in financing agricultural development in Nigeria.
1.4 Aim and Objectives of Study
The aim of this study is to investigate the contribution of money deposit banks to agricultural development in Nigeria, with a focus on two selected banks.
The specific objectives of the study are:
- To assess the extent to which money deposit banks provide credit facilities to farmers.
- To examine the challenges faced by farmers in accessing banking services for agricultural purposes.
- To evaluate the effectiveness of banking interventions and programs targeted at agricultural development.
- To identify strategies that will enhance the role of money deposit banks in supporting the agricultural sector.
1.5 Research Questions
Based on the stated objectives, the research study seeks to answer the following questions:
- To what extent do money deposit banks provide credit facilities to farmers in Nigeria?
- What challenges do farmers face in accessing banking services for agricultural development?
- How effective are existing banking interventions in supporting agricultural development?
- What strategies will improve the contribution of money deposit banks to agricultural growth?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
- H0: There is no significant relationship between money deposit banks’ credit facilities and agricultural development in Nigeria.
- H1: There is a significant relationship between money deposit banks’ credit facilities and agricultural development in Nigeria.
1.7 Significance of Study
It is believed that at the completion of the study, the findings will assist policymakers in formulating strategies that will enhance the availability of agricultural credit. The study will also benefit financial institutions by accentuating areas that will improve efficiency in agricultural lending.
Furthermore, the study will serve as a reference point for future research on agricultural finance in Nigeria, providing empirical data and analysis that will enrich the academic discourse on the intersection of banking and agricultural development.
Lastly, the knowledge generated will inform stakeholders across the public and private sectors, ensuring that efforts to support agricultural growth will be more effective and sustainable.
1.8 Scope of Study
This study focuses on the role of money deposit banks in financing agricultural development in Nigeria, with a particular focus on two selected banks operating in Oyo State. The study covers the provision of credit facilities, challenges faced by farmers, and the effectiveness of existing banking programs in supporting agricultural productivity. The research is limited to agricultural stakeholders and banking officials directly involved in agricultural financing within the selected banks.
1.9 Limitations of the Study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Definition of Terms
Money Deposit Banks:
These are financial institutions that accept deposits from the public and provide loans to individuals and businesses for productive purposes. According to Sanusi (2010), they play a crucial role in mobilizing funds for economic development.
Agricultural Development:
This refers to systematic efforts to improve farming activities, increase productivity, and ensure food security. Olayemi (2017) stated that it involves modern farming techniques, access to inputs, and financial support for farmers.
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