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Determinants of Credit Constraint Conditions and Production Efficiency Among Farming Households in Southwestern Nigeria


  • Omonona, Bolarin T.
  • Lawal, Justina Oluwayemisi
  • Oyinlana, A.O.


Sustaining and improving production efficiency of resource poor smallholder farmers under the existing credit constraint conditions require the improvement of access to credit facilities and other factors involved. The study examined the factors influencing credit constraint (CC) and production efficiency of farming households in Oyo State, Nigeria. Primary data was randomly collected using structured questionnaire from 120 mixed farmers in the study area. Data was analyzed using descriptive analysis, probit regression and stochastic frontier analysis. The results shows that 79.2 percent of the respondents were credit constrained and this has negative influence on their production efficiency as credit constrained farming households (CCFH) were found to be less efficient with mean efficiency of 0.721 than unconstrained farming households with 0.913. Age, gender, education, and dependency ratio of farmers are significant variables that influenced credit constraint conditions of the farmers while the maximum likelihood estimate of the production frontier revealed that farm size, labour and quantity of agro-chemical used are positively and significantly related to the production efficiency of farmers. Given the largest proportion of CCFHs among farming population in South-Western Nigerian, this gap implies considerable potential loss in output due to inefficient production. Improving credit access of farming households in general but more particularly the CCFHs is desirable for higher production efficiency.

Suggested Citation

  • Omonona, Bolarin T. & Lawal, Justina Oluwayemisi & Oyinlana, A.O., 2010. "Determinants of Credit Constraint Conditions and Production Efficiency Among Farming Households in Southwestern Nigeria," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95775, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
  • Handle: RePEc:ags:aaae10:95775

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    References listed on IDEAS

    1. Diagne, Aliou & Zeller, Manfred & Sharma, Manohar, 2000. "Empirical measurements of households' access to credit and credit constraints in developing countries," FCND briefs 90, International Food Policy Research Institute (IFPRI).
    2. Barry, Peter J. & Robison, Lindon J., 2001. "Agricultural finance: Credit, credit constraints, and consequences," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 10, pages 513-571 Elsevier.
    3. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    4. Carter, Michael R., 1989. "The impact of credit on peasant productivity and differentiation in Nicaragua," Journal of Development Economics, Elsevier, vol. 31(1), pages 13-36, July.
    5. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    6. Eswaran, Mukesh & Kotwal, Ashok, 1990. "Implications of Credit Constraints for Risk Behaviour in Less Developed Economies," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 473-482, April.
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