Agriculturae Conspectus Scientificus, Vol 86, No 4 (2021)

Determinants of Institutional Credit Rationing Impact on the Net Farm Income of Catfish Processors in Nigeria

Olabisi Damilola OMODARA, Oreoluwa Grace FAYEMI, Temitope Oluwaseun OJO, Oluwemimo OLUWASOLA, Mjabulesini Simon Cloapas NGIDI

Pages: 361-373


This study investigated the effect of catfish processors' socio-economic characteristics on credit rationing, based on primary data obtained from a cross-sectional survey. It also tested whether credit rationing affected the net farm income of catfish processors, using the endogenous switching regression model (ESRM). To account for counterfactual scenarios, the study turned to the results of the causal effects of credit rationing on the net farm income of catfish processors using inverse-probability-weighted regression adjustment (IPWRA) as a robustness check. The results showed that catfish processing was dominated by male processors with an average age of 40 years, where there were six household members, eight years of processing experience and mostly used a combination of traditional and intermediate processing technologies. Loan deployment was at 43.7%, with not less than 67% recovery and 12% default rates. Annual net income from catfish processing was ₦ 2,973,123.86 (8,035.47 USD) with Operating Expense Ratio (OER), Benefit Cost Ratio (BCR) and Return on Investment (ROI) the 0.99, 1.45 and 0.67 respectively. The ESRM results showed that credit rationing is determined by membership of associations, processing experience, years of formal education, frequency of loan requests and interest rate. Furthermore, age of processors, business size, years of formal education, processing experience and catfish selling price influenced net farm income of credit rationed processors. It was concluded that catfish processing was profitable and had a significant impact on the net farm income of catfish processors. The ESRM treatment effect indicated that the average net income per catfish processing farm of non-credit rationed processors was higher than those that were credit rationed. Therefore, the study canvassed for improved group borrowing among processors and advocated that interests of large-scale old catfish processors be protected in bank credit policies. In addition, the existing laissez-faire financial lending agencies should be integrated into formal credit marketplaces via microfinancing to mitigate the impact of credit rationing.


microfinancing, credit constraint, loan default, ESRM, agribusiness, credit policy, IPWRA

Full Text: PDF