An Analysis Of The Effects Of Membership Homogeneity On The Design And Performance Of Formal Agricultural Microcredit Groups In Southeast, Nigeria.

ABSTRACT

This study was an empirical analysis of the effects of membership homogeneity

on the design and performance of formal agricultural micro-credit groups in Southeast,

Nigeria. Specifically, the study examined the nature of the design characteristics (Credit

allocation method, Credit size and membership size) and also assessed the performance

(Loan repayment, Savings mobilization and Meeting regularity) of the formal agricultural

micro-credit groups with regard to their functions in financial intermediation. The study

also determined the effects of membership homogeneity (Same age, education,

occupation, tribe, religion, marital status) on the design and performance of the formal

agricultural micro-credit groups in the study area, as well as challenges from the

viewpoints of the group members and operators of micro-credit.

Two hypotheses were investigated to enhance the understanding of each set of

design and performance characteristics and hence explain their relationship with one

another. The relevant data for the research were obtained from 24 local government areas

purposively selected because people of the same linguistic group inhabit the Southeast

and have the same characteristics. The presence of many homogeneous farmer groups

was also established in all the states. Structured questionnaires, oral discussions and

participatory observation were techniques adopted to generate the required data used in

the analysis. In all, 260 respondents were randomly selected and interviewed. Formal

finmcial institutions like the Nigerian Agricultural Cooperative and Rural Development

Bank (NACRDB) and Community Banks in the two states were also sampled.

Descriptive statistics, ordinary least square and binomial logit regression models were

used to analyze data obtained.

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Major findings were that: homogeneity of groups does not confer on formal

micro-credit agricultural groups any special advantages in terms of design and

performance. The study noted that homogeneity of some parameters has no significant

effect on some group design and performance elements while it has some significant

effect on others. From the findings, homogeneity of some parameters such as tribe,

occupation and religion has significant effects on performance characteristics of the

groups in terms of loan repayment, and homogeneity in location, age, tribe, education and

religion has significant effect on performance characteristics of meeting regularity, which

also enhances repayment ability. Contrary to expectation, occupation and marital status

expected to have effect on the level of savings mobilization did not matter after all. It was

noted from findings that policy decisions which place emphasis on homogeneity in

designing micro-credit activities focusing on savings mobilization may not likely return

robust outcomes.

Based on the findings, demand for micro-credit services by formal agricultural microcredit

groups in the study area has two different dimensions, quantity and quality. The

qualitative aspect has to do with access to credit while the other aspect is the savings

mobilization aspect regarded as the most important dimension of rural financial services.

The study, therefore, recommended among others that homogeneous groups should be

used in targeted cases as it has no special advantages on all group design and

performance characteristics Also, it is recommended that savings mobilization by farmers

groups should be encouraged. Participatory approach to enhance the capacity of the

FMAG operators to inculcate in them the special skills required for scaling up and scaling

out as well as efficient and effective operations of the system should be adopted.