The Effect of Commercial Bank Lending on the Performance of Agricultural Businesses in Benue State
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Background of the Study
Agriculture plays a significant role in Nigeria’s economy, contributing to both food security and the livelihoods of millions of Nigerians. In Benue State, known as the "Food Basket of the Nation," agriculture is a key sector, with farming, especially crop production, being the main economic activity (Emmanuel & Okafor, 2023). However, despite the importance of agriculture, small and medium-sized agricultural businesses in the state often face challenges related to access to financing, which hampers their productivity and growth. Commercial bank lending has emerged as a crucial source of financial support for these agricultural businesses (Ibrahim & Obi, 2024).
The role of commercial banks in providing loans to agricultural businesses has gained increasing attention in recent years, with many stakeholders recognizing that the availability of financial resources is crucial for the growth and development of the agricultural sector. However, commercial bank lending to the agricultural sector in Nigeria has been characterized by several challenges, including high-interest rates, stringent collateral requirements, and short repayment periods, which often deter farmers from accessing loans (Akinyemi & Abubakar, 2025). Despite these challenges, some agricultural businesses in Benue State have successfully utilized loans from commercial banks to improve their production capacities, expand operations, and enhance market access.
The effectiveness of commercial bank lending on the performance of agricultural businesses in Benue State remains an underexplored area. While there are anecdotal reports of positive outcomes from bank loans, a comprehensive study on the impact of such loans on agricultural business performance is needed to understand how these loans contribute to business growth, job creation, and the overall development of the agricultural sector in Benue State (Omojola & Durojaiye, 2023).
Statement of the Problem
The agricultural sector in Benue State faces significant challenges, including limited access to financial resources, poor infrastructure, and outdated farming techniques (Adebayo & Gana, 2024). While commercial banks have been identified as key financial partners for agricultural businesses, the impact of their lending activities on the performance of these businesses remains unclear. Some agricultural businesses in Benue State have benefited from bank loans, but many others still struggle with high-interest rates, collateral demands, and loan repayment difficulties, which adversely affect their performance (Adeoye & Tukur, 2025). Moreover, commercial banks are often reluctant to lend to the agricultural sector due to its perceived risks, leading to an insufficient flow of credit to the sector.
This study seeks to investigate the effect of commercial bank lending on the performance of agricultural businesses in Benue State. The aim is to assess how access to credit influences the growth, productivity, and sustainability of these businesses and to identify the barriers to effective lending practices in the agricultural sector.
Objectives of the Study
1. To examine the effect of commercial bank lending on the performance of agricultural businesses in Benue State.
2. To evaluate the challenges faced by agricultural businesses in accessing commercial bank loans in Benue State.
3. To analyze the role of commercial bank loans in improving agricultural productivity and sustainability in Benue State.
Research Questions
1. How does commercial bank lending affect the performance of agricultural businesses in Benue State?
2. What challenges do agricultural businesses in Benue State face in accessing commercial bank loans?
3. How do commercial bank loans contribute to the improvement of agricultural productivity and sustainability in Benue State?
Research Hypotheses
1. Commercial bank lending has a significant positive effect on the performance of agricultural businesses in Benue State.
2. Agricultural businesses in Benue State face significant challenges in accessing commercial bank loans.
3. Commercial bank loans contribute to increased agricultural productivity and sustainability in Benue State.
Scope and Limitations of the Study
The study will focus on agricultural businesses in Benue State that have accessed commercial bank loans. The analysis will cover the impact of these loans on business performance, including productivity, profitability, and growth. Limitations include the availability of accurate financial data and the challenge of measuring agricultural productivity across diverse sub-sectors.
Definitions of Terms
• Commercial Bank Lending: The provision of loans by commercial banks to individuals or businesses.
• Agricultural Businesses: Enterprises involved in farming, crop production, and related activities.
• Performance: The ability of a business to achieve its objectives, including growth, profitability, and sustainability.
• Productivity: The efficiency of production in terms of output per unit of input.
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