Does microcredit have any impact on profit efficiency? Evidence from smallholder poultry farmers in Nigeria

The relationship between microcredit and variances in profit efficiencies among smallholder poultry farmers has received little attention. This study therefore investigates the impact of microcredit on the profit efficiency of smallholder poultry farmers in Nigeria. A multistage sampling procedure was used to obtain data for the study. The novel, nehurdle estimation procedure of the double-hurdle model, stochastic profit frontier function, and endogenous switching regression models were used to analyze the data. The findings of the first hurdle show that interest rate, loan repayment, access to extension service, and membership in a farmers' organization have a significant impact on the ability of poultry farmers to obtain microcredit, whereas the findings of the second hurdle show that loan repayment period, access to extension service, and bird stock size have a significant impact on the amount of microcredit obtained by smallholder poultry farmers. The SPFF model shows that the average profit efficiency estimate is 73.6 percent, and that flock size, feed, labor, medications, and veterinary service cost have a significant impact on the profit efficiency of poultry farmers. The average ATT is 11.346, and it is statistically significant at 1%. This suggests that farmers who have access to microcredit are substantially more profitable than those who do not. This study is the first, to the best of authors’ knowledge, to establish that access to microcredit has a positive impact on the profit efficiency of poultry farmers. As a result, agricultural programs aimed at increasing the profit efficiency of poultry farmers should include measures that make it easier for them to obtain microcredit.