FACTORS INFLUENCING ACCESSIBILITY TO CREDIT FOR SMALL-SCALE FARMERS IN OSUN STATE, NIGERIA

Abstract

This study investigates the factors influencing accessibility to credit for small-scale farmers in Osun State, Nigeria, with a specific focus on identifying the most critical barriers to credit using Principal Component Analysis (PCA). Findings from the result of PCA revealed that three major components—collateral requirements, loan application procedures, and loan disbursement timing account for 74.66% of the total variance in access to credit. Collateral requirements emerged as the most influential factor, contributing 36.64% to the total variance. This reflects the systemic difficulty faced by small-scale farmers lacking formal assets to meet traditional collateral demands. Loan application procedures (22.95%) were the second most influential factor, highlighting procedural complexities and low literacy as barriers to participation. Timeliness of loan disbursement (15.08%) was also a key determinant, especially given the seasonal nature of agricultural inputs and activities. The study concludes that targeted reforms in collateral policy, simplification of application processes, and better alignment of disbursement with planting seasons are essential to improving financial inclusion for smallholder farmers. Based on these insights, the study recommends that cooperatives and financial institutions simplify loan processes, develop alternative collateral options such as group guarantees or movable asset pledges, and align credit disbursement with seasonal agricultural cycles. These interventions are expected to enhance small-scale farmers’ access to productive credit and improve overall agricultural output in Osun State.