AN EVALUATION OF THE IMPACT OF IFELODUN MICRO FINANCE BANK IKIRUN ON AGRICULTURAL DEVELOPMENT IN IFELODUN LOCAL GOVERNMENT AREA

CHAPTER ONE

INTRODUCTION

1. 1. BACKGROUND OF THE STUDY

Nigeria is a country that is enclosed by nature with all the resources that facilitate Agricultural Development. These include Vast Kind of areas, rich soil, plenty of rainfall and hardworking peoples. Nature has been generous to this country. So when Nigeria attained Independence in 1960, agriculture was the dominant sector of the economy. It constituted over 65% of the country’s gross domestic product (GP) and provided the bulk of foreign exchange earning through the export of cash crops. There is therefore little or no wonder that pivot of discovery of oil. This country has been a great exporter of farm produce as groundnut, cocoa, palm cannel and oil, cotton and rubbers.

The overall agriculture deteriorated creating a wide gap between supply and demand for food and revenue from agricultural export demanded. So government was faced with mouthing food import bills at the same time, industries, increasingly restore to importing agricultural raw materials. In order to tackle some problems facing the agricultural sector, the federal government and central bank of Nigeria (CBN) put in place certain policies no respect agricultural financial through:

1. 1. The establishment of specialized financial institution likes The Nigeria Agricultural and Micro Finance Bank (NAMB), Peoples bank among others.

1. 1. Credit and control policy under the policy of commercial merchant Bank of Nigeria (CBN) through monetary policy circular to lend a certain percentage of their loan portfolio to farmers and agro- based industrialist.

1. 1. Their establishment of special scheme like agricultural credit guarantees scheme (ACGS), the Nigeria agricultural insurance, company (NAIC), Small and Medium Scale Enterprises (SME), were established to supplement the activities of specialized financial institutions in credit delivery. Since finance is a key element for modernization of agricultural and agro- allied business, because necessary to study the contribution of micro finance banks on Agricultural Development with special reference to Ifelodun Microfinance Banks Ikirun Osun State.

1. 1. STATEMENT OF THE PROBLEM

The contribution of micro finance bank to Agricultural Development can not be over emphasized in the development of the any state or country particularly at local government level.

Agricultural contribute greatly to the revenue generation and the economic growth and development of the local government and individual.

In view of the laudable contribution of microfinance Bank to Agricultural development it is necessary to examine these contributions in Osun State with particular reference to Ifelodun Local Government area Ikirun.

1. 1. RESEARCH HYPOTHESIS

The statement of hypothesis includes null hypothesis (Ho) and alternative hypothesis (Hi). They are as follow:

Ho:      Ifelodun micro finance Bank contribution to Agricultural development is not significant.

Hi:       Ifelodun micro finance Bank contribution to Agricultural development is significant.

Ho:      There is no significant relationship between microfinance Bank and Agricultural development at Ifelodun Local government Area.

Hi:       There is no significant relationship between microfinance Bank and agricultural development in Ifelodun Local Government.

1. 1. PURPOSE OF THE STUDY

Despite the federal government and central bank of Nigeria (CBN) policies in respect of agricultural financing in Nigeria. The sector still remains in picturing of shoddy performance. Therefore, it is imperative to study the role of micro finance bank in financing through agricultural credit guarantee scheme (ACGS).

1. 1. SCOPE OF THE STUDY

The study covered the contribution of micro finance banks to agricultural development in Ifelodun local government area.

It will look at the general overview of micro finance banks contribution to agricultural development in Ifelodun local government area Osun State.

1. 1. LIMITATION OF THE STUDY

In considering the wideness of this topic or study the extent at which we intend to treat the topic is insufficient supply of text book, time factor, financial constraints, distance and inadequate information given by the banks and farmers.

1. 1. SIGNIFICANCE OF THE STUDY

The study has become relevance to the academic community and the society in general. Micro finance contribution to agricultural development in Ifelodun local government area makes the society in general to known the contribution of micro finance bank to agricultural in Nigeria.

Also, the academic community and society will benefit when there is increase in the development of agriculture through financing by micro finance bank.

1. 1. DEFINITION OF TERMS

i          Agricultural : Refers to the production of foods and cash crops.

Ii          Funds: This can be simply refers to money or anything that can be used for          settlement of debits.

iii.        SME: Small scale medium

iv.        NAIC: Nigeria agricultural insurance company

v.         Lending: This is the act of given out money and collect it back of a specified date with interest.

vi.        Agroallied: This is the chemical used in agriculture in order to prevent any pesticides like rodent, bird e.t.c.

vii.       NACB: Nigeria Agricultural and Cooperative Bank.

viii.      Interest Rate: This is the amount charged on any given out at a specific period of time.

ix.        Financing Opportunity: This refer to finance available with the business, either injected by owners as equity and director loan.

x.         Formal Sectors: This consists of some component like banking system, the capital market, non bank financial institutions.

xi.        Informal Sector: This consists of money lenders, trade association, age grade association.

1. 1. HISTORICAL BACKGROUND OF IFELODUN MICRO FINANCE BANK IKIRUN

           Ifelodun Micro finance Bank was incorporated on 11th June 1991 as Ifelodun Community Bank Limited. It was granted provisional license to carry on banking business on 2nd December 1992.

It was commissioned by Alhaji Isiaka Adeleke the first Executive Governor of Osun State. The Bank was under the control of National Board for Community Bank (NABCB) between 1992 and 2002, in the year 2003; central bank of Nigeria (CBN) took over the control and issued another authentic practicing lenience.

            In 1992, the bank (Ifelodun Community Bank now Micro Finance Bank) started banking business with paid up capital of #500,000 only. Between 1994 and 1995, paid up capital rose to #5 million the paid up capital of Ifelodun community bank limited now Ifelodun microfinance bank limited rose to #10 million in the year 2005.