Full Project – Cooperative and agricultural financing

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CHAPTER ONE

1.0  INTRODUCTION

1.1  GENERAL OVERVIEW OF THE STUDY

Agriculture is the oldest industry known to mankind and it is the source of our food and raw material for many industry (Lot, 1985), infact, it can be justifiably referred to as the worlds primary industry (Lot, 1985). At more than 25 years after the country’s political independence, it is a paradox that Nigeria agriculture still manifests the typical symptoms of a peasant agriculture, the farms are small averaging less than five (5) hectares of land and accounting for over 90 percent of the total production, the farming population is itself rapidly going down, with attendant deterioration in the vigour and stability of the human labour, the  primary production suffers from irreversible rural and urban migration which contributed to the depopulation of the country side thereby making labour more scare and thus more expensive, the livestock industry is dominated by nomadic herdsmen while the fishing sectors is essentially artisans, the forestry resources which are the bounties of nature suffer from massive exploitations without regeneration (Ijere et al., 1988).

The result of that is low productivity and slow rate of growth which is between (1980-1985) has been put at one percent per annum. For an economy which is heavily skewed inferior of primary production, this growth rate will hardly be seen as impressive. The cause of this is stagnation in the agricultural sectors which is so numerous and varied as they are complex. It has been argued that the oil “syndrome” has undermined the performance of the agricultural sector by accelerating the shift of labour, capital managerial talent to other industries (Ijere et al., 1998). Also the past urban basis for public policies enhanced the productivity of investment in non-agricultural commodities to the detriment of investment in the agricultural sector (Ijere et al., 1998).

1.2  STATEMENT OF THE PROBLEM

The problem associated to cooperative and agricultural financing has caused a lot of harm than good in the industry and commercial sector. The major ones are the inadequate funds to execute a project in the rural areas. As a matter a fact farmers who live virtually below the subsistence level and have no real connections with the people that matter in the community or society have no tangible assets to bank or government grants. Presently the locations of commercial banks are almost confirmed to the urban areas. Being profit oriented, those commercial banks tend to favour their concentration on their branches alone which is the urban areas where business is booming (Ijere, 1985).

A pertinent question to ask then is at a micro level, are the rural areas’ industrialists and farmers doomed to external acute shortage of funds.

1.3 OBJECTIVES OF THE STUDY

The overall objective of this study is to analyse the role of a cooperative and agricultural financing in Abia State. The specific objectives include:

1. To identify the socio-economic characteristics of cooperatives in the studies.
2. To determine the sources of financing of cooperative     societies in the study area.
3. To identify factors that influence the capital reserves of cooperative societies.
4. To determine the extent to which cooperative societies have improved their farmer’s access to financial capital. 5.    To make policy recommendations based on the findings        of the study.

1.4  SCOPE OF THE STUDY

Nigerian agriculture is a developing agriculture characterized by low level of private investment and changing technology. Agricultural development is a process involving the adoption by farmers of new and better agricultural practices leading to increased productivity and overall welfare of the economy.

Credit mobilization in Nigeria, as in many developing countries is predicated on many interrelated factors, chief of which are the economic situation of the country, the organizational structure of public and private credit institutions and availability of investment opportunities (Ijere, 1985).

The study will serve as an eye opener to the farmers about the important roles of cooperative societies and to encourage them to participate in cooperative activities.

1.5  TEST OF HYPOTHESIS / QUESTIONS

The followings are hypothesis to be tested:

1. Ho: Cooperative and agricultural financing have not     contributed to the growth of the economy.
2. Hi: Cooperative and agricultural financing have contributed to the growth of the economy.
3. Ho: the amount of fund available to cooperative is negatively related to their membership strength.
4. Ho: the amount of fund available to cooperative is positively related to their membership strength.

1.6  SIGNIFICANCE OF THE STUDY

Nigerian agriculture is a developing agriculture characterized by low level of private investment and changing technology. Agricultural development is a process involving the adoption by farmers of new and better agricultural practices leading to the increase in productivity and overall welfare of the economy (Agu, 1998).

Credit mobilization in Nigeria as in many developing countries is predicated on many interrelated factors chief of which are the economic situation of the country the organizational structure of public and private credit institutions and availability of investment opportunities (Ijere, 1985). The study will serve as an eye opener to the farmers about the important roles of cooperative societies and thus encourage them to participate in cooperative affairs.

1.7  LIMITATIONS OF THE STUDY

This has given rise to a strong industry and commercial sector which is in highly hooked to the whimsy caprices of international economic manipulation, and offering such high wages which can not be offered in any farm enterprise (Ijere et al 1998). Added to this is the high-income expectation in the urban areas which has greatly enhanced the rural and urban migration especially among the young and able bodied, leaving only the aged men and women to adone the rural village. A further cause of stagnation in the cooperative and agriculture is the low level of mechanization of farming practices with the prevalent use of hoes and cutlasses and the limited use of facilitating inputs (fertilizers) as well as low level of post harvest technology  (Ijere and Ajakaiye et al 1998).

These together with a failure to ensure stable remuneration prices and marketing channels result in chronic low income and small holding operated largely for family sustenance with very little market participation (Ajakaiye 1998). Therefore, caught up in this various circle of low productivity, small holdings and low income, farmers have very limited capacity for capital accumulation on which the development of their low resources based on the need to create a credit system capable of financing of cooperative and agricultural becomes germane to a discussion on agricultural development programme.

1.8  DEFINITIONS OF THE TERMS

At this point an attempt will be made to give the definitions of cooperative and agricultural financing.

Cooperative according to international labour organization they defined cooperative as an association of people who have voluntarily joined together their resources to achieve a common end through the formation of a democratically controlled business organization, making equitable contributions to the capital required and accepting a fair share of the risk and benefit of the undertaking in which the members actively participated. (ILO, 1966).

Also, according to International Cooperative Alliance 1995, they defined cooperative as an autonomous association of persons united voluntarily to meet their common economic, social, cultural needs and aspirations through a jointly owned and democratically controlled enterprised.

Agriculture can be define as that branch of rural economy that is engaged in the production of farm products through the use of, water, land, forest and other related farm resources.

Finance can be defined as the management of the flows of money through an organization.

Also finance can be defined as a way by which an organization raises money for the day-to-day running of a business.

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Full Project – Cooperative and agricultural financing