(a) Briefly explain agricultural finance; (ii) agricultural credit (b) Explain four significance of agricultural finance (c) Mention one problem farmers encounter in obtaining credits from the following credit sources: (i) co banks; (ii) community banks; (iii) money lenders; (iv) family sources
Explanation
(a)(i) Agricultural finance: This is the economic study of the acquisition and use of capital in agriculture. It deals with the supply of and demand of funds in the agricultural sector of the economy. (ii) Agricultural credits: These are loans obtained by the farmer to start or to expand his farming business. It is repayable over a period of time with some interest as determined by the source of the credit.
(b) Significance of agricultural finance are: (i) It enables farmers to adjust to changing economic conditions. (ii) It increases efficiency. (iii) It encourages farmers to take up new farming innovations. (iv) It ensures timeliness of farm operations. (vi It brings about several significant changes in the structure of agriculture, i.e the substitution of physical capital for labour and the increased use of purchased inputs. (vi) It enables the creation and maintenance of an adequate farm size. (vii) There is a rapid increase in farm land value whit necessitate the farmer to look outward for fund. (viii) It protects against adverse conditions. (ix) It enables farmers' adjust to seasonal and annual fluctuation in income and expenditure.
(c) Problems encountered by farmers in obtaining loans are: (i) Commercial banks: (1) They are usually biased in favour or large scale farmers only. (2) Th( demand collateral which farmers cannot provide. (3) There is the problem of relative, higher interest rates. (ii) Community banks: (1) The amount of credit is usually small and inadequate to meet the needs of farmers. (2) They insist on would be-lender coming to open account with them before any loans are given. (iii) Money lenders: (1) They are usual biased towards enterprises that bring in quick returns to repay the loan. (2) Their interest rates are too high to allow for an appreciable input from the farm business. (iv) Family sources: (1) The size of loan is usually small and inadequate