Effect of Operational Guidelines of Bank of Agriculture on Loan Disbursment and Repayment Performance of various Lending Schemes in Kwara State

Abstract

Access to credit from agricultural institutions by farmers is reduced by their operational guidelines. A case of Bank of Agriculture (BOA) in Kwara State where effective disbursment is not followed by efficienct repayment has made credit accessment in the state a problem. This study investigated the influence of operational guidelines of this bank on loan disbursed and recovery across the various schemes obtainable in the bank. Secondary data on loan disbursment and repayment and default were obtained from the three schemes operated by the bank which include Direct Lending (DLS), Macro Loan (MLS) and Special credit/Collaboration schemes (SCCS) of BOA Kwara State were used for the analyses. Data were analysed using simple descriptive and inferential statistics (Analysis of Variance (ANOVA)). Result shows an annual disbursment value of N25,955,000.00, N133,520,000.00 and N14,850,000.00 DLS, MLS and SCCS respectively. Annual repayment value of N8,353,500.00, N161,940,000.00 and N22,829,000.00 was obtained from DLS, MLS and SCCS respectively while a default value N648,494.97, N10,621,000.00 and N5,986,200.00 was recoreded annually DLS, MLS and SCCS respectively. This implies that despite the high disbursment value made by MLS of the bank, which reflects a high level of risk, the scheme had the best repament performance with low default. The efficiency of this scheme could be due to the strict recovery guidelines on defaulters, which include the deposition of a property as collateral to the bank, which might be sold to recover the money in any case of default. It may not be suitable for farmers in DLS whose are often landless resource poor with only labour as collaterals.

Key words: Disbursment, repayment, default, Direct, macro and collaboration scheme