Major determinants of agricultural smallholder loan repayment in a developing economy: Empirical evidence from Ondo State, Nigeria

Poor loan repayment in developing countries has become a major problem in agricultural credit administration, especially to smallholders who have limited collateral capabilities. This paper therefore examines the determinants of smallholder loan repayment among the clientele farmers of the Ondo State Agricultural Credit Corporation in Nigeria. Four major determinants were identified, which had tremendous effect on the loan repayment performance of the farmers, as demonstrated by their significant correlation to repayment rate. These factors were the nature and the timeliness of loan disbursement, the number of supervisory visits by credit officers and the profitability of the enterprise on which loan funds were invested. This empirical evidence tends to suggest that agricultural loan repayment by farmers in a developing economy such as Nigeria could be vastly improved through careful management of these four major determinants.