The Role of Financial Education in Loan Repayment Success: Evidence from Farmers in Benue State
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Background of the Study
Access to credit is essential for the growth of agricultural enterprises, particularly among farmers in rural Nigeria. However, the lack of financial education is often cited as a major barrier to successful loan repayment. Financial education equips borrowers with the knowledge and skills necessary to manage credit effectively, fostering improved repayment behaviors. According to FAO (2024), farmers with financial literacy training are 30% less likely to default on loans compared to those without such training.
Benue State, known as Nigeria’s food basket, has a high concentration of smallholder farmers who depend on agricultural loans for inputs and expansion. Despite the availability of credit facilities, high default rates remain a challenge, limiting the willingness of financial institutions to lend to farmers. Studies by Oladipo et al. (2023) suggest that a lack of understanding of loan terms, inadequate budgeting skills, and poor record-keeping contribute to these defaults.
This study explores the role of financial education in improving loan repayment success among farmers in Benue State, providing evidence for the design of targeted interventions to enhance credit management.
Statement of the Problem
Loan repayment default among farmers in Benue State is a critical issue that threatens the sustainability of agricultural financing. Many farmers lack the financial knowledge needed to manage loans effectively, leading to high default rates. This issue not only affects the farmers’ access to future credit but also undermines the confidence of financial institutions in lending to the agricultural sector.
Although financial education has been identified as a potential solution, there is limited research on its effectiveness in improving loan repayment among farmers in Benue State. This study addresses this gap by investigating the relationship between financial education and loan repayment success.
Objectives of the Study
1. To examine the impact of financial education on loan repayment success among farmers in Benue State.
2. To identify specific financial skills that influence loan repayment behaviors.
3. To propose strategies for integrating financial education into agricultural loan programs.
Research Questions
1. How does financial education affect loan repayment success among farmers in Benue State?
2. What financial skills are most critical for improving loan repayment behaviors?
3. What strategies can enhance the effectiveness of financial education programs?
Research Hypotheses
1. Financial education significantly improves loan repayment success among farmers.
2. Farmers with better budgeting skills are less likely to default on loans.
3. Integrating financial education into loan programs significantly reduces default rates.
Scope and Limitations of the Study
This study focuses on farmers in Benue State who have accessed agricultural loans between 2023 and 2025. Limitations include varying levels of literacy among respondents and potential bias in self-reported financial behaviors.
Definitions of Terms
• Financial Education: The process of acquiring knowledge and skills to manage financial resources effectively.
• Loan Repayment Success: The ability to repay borrowed funds within agreed terms.
• Farmers: Individuals engaged in agricultural production, primarily in rural settings.
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