Risk management in agriculture

Periodical

Beyond the Risk Factor: Bank Lending to Small-Scale Peasant Farms in Nigeria,

“African review of Money Finance and Banking”, issue 2003

The failure to realize the potential increase in agricultural production has forced the Nigerian government to introduce programmes to address the problem of risk in small-scale farming. The government has introduced two programmes. The first one is the Agricultural Credit Guarantee Scheme Fund that guarantees bank loans against defaults not arising from adverse natural occurrences, and the second is a subsidized insurance scheme (Nigerian Agricultural Insurance Scheme) that insures bank loans against the occurrence of risks of nature that can cause loan default. However, in spite of these programmes the banks still appear reluctant to lend to the farm sector. This paper examines changes in bank lending to the farm sector before and since the inception of the subsidized credit insurance in Nigeria. It also identifies the pattern of bank lending to different agricultural sub-sectors. The findings from the study suggest that there is the need for the government to review its policy of underwriting loans as an instrument to encourage increased bank lending to small-scale farmers.

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