CREDIT MANAGEMENT TECHNIQUES IN AGRICULTURAL CO-OPERATIVE BANK IN NIGERIA

 
This project is written to be useful to all who are interested in co-operative organizations, banks and the general public. This is to reveal the process of effective management of credit in Co-operative Agricultural Bank in Enugu.  In this project, one finds out the means of which this Bank of Agriculture grants loans to public.  For example, critical examining showed that BOA grants two broad categories of loans namely: micro and macro.  At the macro level, only agricultural projects like agro processing, marketing, production, etc are considered.  While non-agricultural projects financed under micro include artisans such as vulcanisers, road side mechanics, barbing, hair dressing saloons etc.  Factors militating against effective credit management in Agricultural Co-operative Banks in Enugu were revealed both economical and political. The method use in collecting data for this project is presented in tables and analysed using simple percentage rating.  Much recommendations on the way/ways of improving co-operative credit management is critically highlighted.
 
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
Bank of agriculture is the nation’s apex agricultural and rural development financial institution. As a development finance institution it is government owned (CBN 40% and federal ministry of finance 60%) and supervised by federal ministry of agriculture. The bank was incorporated as Nigerian Agricultural Bank (NAB) in the year 1973 and in the year 1978 was renamed Nigeria Agricultural and Co-operative bank (NACB). Subsequently in the year 2000, it was merged with the people’s bank of Nigeria (PBN) and took over the risk assets of Family Economic Advancement Programme (FEAP) to become Nigeria agricultural Co-operative and Rural Development Bank. A plan to reposition the bank into an effective and sustainable national agricultural and rural development finance institution in 2010 led to a further name change to Bank of Agriculture (BOA). Bank of agriculture limited is dedicated primarily to agricultural financing at both the micro and macro levels as well as micro financing of small and medium scale enterprises. The bank has a 3-tier administrative structure.  The Head Office is in Kaduna and there are six zonal offices located at Abuja, Kano, Bauchi, Enugu, Port Harcourt and Ibadan.  Under the Zonal Offices, there is a network of over 200 branches.  Enugu zonal office is responsible for monitoring and supervision of the activities of the 26 branches in the South-East zone which are distributed as follows:
26 BRANCHES IN THE SOUTH – EAST ZONE UNDER ENUGU ZONAL OFFICE SUPERVISION
ABIA, ANAMBRA, EBONYI, ENUGU, IMO, Umuahia, Awka, Abakaliki, Enugu, Owerri, Akoli Imenyi, Ihiala, Afikpo, Nsukka, Aboh Mbaise, Isuochi, Nteje, Akaeze, Oji River, Atta, Ohafia, Oko, Onicha, Mgbowo, Ideato, Ukwa, Onitsha, Uburu, Oguta, Ukpo and Orlu
The awareness of the serious decline in agricultural production necessitated the establishment of the bank.  The BOA is not the only financial institution which provides agricultural credit.  Prior to the establishment of BOA, agricultural credit schemes was operated by some agencies such as the Ministry of Agriculture, supervising credit scheme, agricultural credit co-operative thrift and loan scheme, farmers multi-purpose co-operative societies.  Most of these institutions were not effective sources for strictly agricultural credit.  There were a lot of evidence that creditors borrowed money for agriculture but diverted it to other ventures.  Again, credit was often extended to only favourites and scarcely to genuine small scale farmers.  Besides, they could not meet the collateral and equity contribution requirements, a situation that compelled a significant proportion of the farmers to seek for other sources of credit.
According to Idachaba quoted from Cardoso, (2017) or research carried out showed that 58% of farming related borrowing was from family and friends, 224% from private money tenders, 15% from merchants and only 3% from institutional sources. It is against this background that the researcher is to investigate how credit will effectively administered in co-operative enterprises.  They will enable us to identify the major problems associated with credit administration in co-operative agricultural banks and seek solution to these problem to ensure continued existence of developing co-operatives.
In this sector, co-operative banks mobilizes credit for their members through the savings of members.  It has been observed that they are inefficient in mobilizing and utilization of credits.  Many problems led to this ineffective mobilization of credit.  They are:
- Illiteracy and lack of awareness.
- High cost of credit delivery due to the fact that farmers are many and are scattered.
- Default in loan repayment.
- Inadequate funds to lend to the numerous customers.
- Diversion of loans
- Inefficient management of loan
- Faulty loan policy which may sometimes emphasize credit worthiness of borrowers and not viability of projects.
- Credit operations of meek money activities without proper organization procedure and planned systematic arrangement.
-  Absence of regular monitoring and supervision of loans.
The above problems need to be solved for effective performance of co-operatives.
The situation of co-operatives is nothing to write home about, if co-operatives should continue at this rate, they will wind up.  In view of the above, solution have to be designed for these problems. Therefore, the objective of the study is to find out the various societies existing in the area under review.  To find out various problems being encountered by these co-operatives which tend to hinder their effective and efficient performance as agent of credit.  Finally, to make recommendations and suggest probably solutions that will enable these societies overcome the problems so as to function effectively.
For the fact that credit is very important in every business activities, therefore, the study is focused on finding relevant solutions to the following research questions:
1.  How do you manage your agricultural credit techniques?
2.  What is the purpose of credit management in agricultural co-operative bank in Enugu South?
3.  What problems are encountered in the administration of credit in agricultural co-operative bank and what are the solutions to these problems?
 
The study will assist the loan committed managers in their decision making, as it concerns credit policy and management of credit in form of proper assessment of loan applications, proper supervision of credit and evaluation of project proposals.  It will help the management to see the need to employ professional staff.
Lastly, the study or findings will be of educational importance to the various universities, polytechnics and students of co-operative departments in the various schools.
For clarity of purpose, limitation of confusion and any kind and the proper understanding of this study, the following definition of terms is necessary:
Credit:  David W. Pearly defined credit as financing directly
or indirectly, the expenditure of other against future repayment.  Such lending or financing is direct when say, a bank extend an overdraft facility to a customer who then uses it.  It is indirect when a trader or producer supplies goods on credit.  Traditional savings and credit groups are one of the most common variants of informal financial intermediaries in rural areas (Ijere2011).
Management:  administration or management is the art of
attempting to achieve stated objectives by directing human activities in the production of goods and services.  Management utilizes the land, factory, officers, machinery and other facilities at the disposal of the enterprises in the most effective, efficient and profitable manner.  Bob Igwe (2013).
TECHNIQUE:  Method of performing something.
ENTERPRISE:  Enterprise is an economic system in which
individuals are free, singly, collectively.   To own capital and undertake economic activity within a frame work of social legislation designed to protect the interest of the members (Hamson 2014).