Microcredit and Technical Efficiency of Rural Farm Households in Egba Division of Ogun State Nigeria

Abstract:

This study examined the effect of microcredit on technical efficiency of rural farm households in Egba division of Ogun State. Multistage sampling procedure was used to select 160 rural farm households used for the study. The data collected were analyzed using descriptive statistics, probit regression model and stochastic frontier production analysis. The findings revealed that majority of the rural farm household heads are in their active ages. It was also revealed that most farm household heads are fairly educated with relatively high experienced in farming. The significant factors that determine access to credit among rural farm households as revealed by the probit result include age(p<0.05), farm size(p<0.01), household size(p<0.01), farming experience(p<0.01) and education(p<0.10). The stochastic frontier production function result revealed that farm output increases with farm size(p<0.05), family labour(p<0.05) and hired labour(p<0.05) but decreases with increase in intermediate materials(p<0.10). The inefficiency model revealed that age (p<0.05), farming experience(p<0.05), education(p<0.05), household size(p<0.10) and credit(p<0.05) increase the technical efficiency of the farmers. The mean technical efficiency of 0.69 implies there is room for improvement in the technical efficiency level of the rural farm households by 31 percent. Policy option requires the strengthening of the education of farmers and increase in the level of awareness on the benefit of credit to increase the production efficiency among rural farm households in the study area.