Determinants of agricultural loan decision-making process for rice (oryza sativa) farmers in Abuja, Nigeria. Applications of Heckman two-stage model and factor analysis

This study focuses on determinants of the agri-cultural loan decision-making process of rice (Oryza sati-va) farmers in Abuja, Nigeria, using the Heckman two-stage model and factor analysis. This study was designed spe-cifically to achieve the following objectives: determine the socio-economic profiles or characteristics of rice farmers, analyze the costs and returns of rice production, evaluate factors influencing rice farmers’ decision to obtain an agri-cultural loan, evaluate socio-economic factors influencing the amount of the agricultural loan, and determine the con-straints or problems facing rice farmers. A multi-stage sam-pling design was employed. A total sample of one hundred (100) rice farmers was included, and primary data were uti-lized. Data were obtained through the use of a well-structured and well-designed questionnaire. Statistical and economet-ric tools used in analyzing data included descriptive statis-tics, gross margin analysis, financial analysis, the Heckman two-stage model, and principal component analysis. The re-sults show that 63% of rice farmers were between the age of 31–50 years. The mean age was 41.90 years. About 65% of rice farmers were male, and 54% of them were married. Also, 93% of rice farmers had formal education and were lit-erate. The household sizes were large, with an average of six persons per household. An average of 71,550 nairas was the loan amount granted to rice farmers by financial institutions. The average farm size amounted to 1.49 hectares. Factors influencing the decision of rice farmers to obtain agricultural loan included age (P < 0.01), marital status (P < 0.05), house-hold size (P < 0.10), educational level (P < 0.05), farm size (P < 0.05), farm and non-farm income (P < 0.10), farm ex-perience (P < 0.05), collateral property (P < 0.05), extension services (P < 0.10), and awareness of loan or credit facilities (P < 0.05). Rice production was profitable with a net farm in-come of 744,300 nairas. The gross margin ratio of 0.95 means that 95 kobos covered profits, taxes, expenses, interest, and depreciation for every naira invested in rice production ac-tivities. Socio-economic factors statistically and significantly influencing the amount of agricultural loan obtained by rice farmers included (P < 0.05) sex (P < 0.01), household size (P < 0.05) and educational level (P < 0.01). The constraints facing rice farmers in obtaining the agricultural loan and pro-duction activities included lack of collateral property, lack of fertilizer input, poor-quality feeder roads, lack of credit facilities, inadequate labor input, and complicated and costly administrative procedures to obtain a loan. It is recommended that agricultural loans be made available to rice farmers in sufficient amounts and at low-interest rates. Also, farm inputs, fertilizer inputs, improved seeds, and chemicals should be made available to rice farmers.