An assessment of the impact of seasonal agricultural cycles on rural loan performance: a case study of Guaranty Trust Bank
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Background of the Study
Seasonal agricultural cycles have a profound influence on rural loan performance, as the timing of planting, harvesting, and market sales affects farmers’ cash flows. Guaranty Trust Bank (GTBank) has recognized that aligning loan products with seasonal income patterns is essential for reducing defaults and enhancing credit sustainability in rural areas (Adekunle, 2023). The bank has introduced flexible repayment schedules and seasonal loan products that account for the cyclical nature of agriculture, ensuring that credit terms are responsive to periods of high and low income. These measures are designed to reduce the financial strain on farmers during off-peak seasons and to promote timely loan repayments during harvest periods.
By tailoring loan products to the agricultural calendar, GTBank aims to improve overall loan performance and reduce the incidence of non-performing loans. The bank’s initiatives include periodic monitoring of repayment behavior, real-time adjustments of credit terms, and financial advisory services to help farmers plan for seasonal fluctuations (Olatunji, 2024). Digital tools are also employed to track cash flows and predict potential repayment difficulties. However, despite these adaptive measures, external factors such as unexpected weather events, market volatility, and pest infestations continue to disrupt income streams, affecting loan performance (Ibrahim, 2025). This study assesses the impact of seasonal cycles on rural loan performance at GTBank, providing insights into how seasonal variability influences credit outcomes and identifying strategies to better manage these fluctuations.
Statement of the Problem
Although GTBank has developed seasonal loan products to align with agricultural cycles, rural loan performance remains inconsistent. Many farmers experience significant income fluctuations due to unpredictable weather patterns and market dynamics, leading to delays or defaults in loan repayments (Adekunle, 2023). The challenge is further compounded by inadequate forecasting and insufficient flexibility in existing loan terms, which do not always accommodate unforeseen seasonal disruptions. As a result, the bank faces higher levels of non-performing loans during adverse seasons, which undermines overall portfolio performance (Olatunji, 2024). Moreover, the limited financial literacy among some borrowers prevents effective planning for seasonal cash flow variations. These factors create a critical need for enhanced risk management strategies that can mitigate the negative effects of seasonal variability on loan performance (Ibrahim, 2025).
Objectives of the Study
• To evaluate the effect of seasonal agricultural cycles on loan repayment performance.
• To identify the challenges caused by seasonal income variability.
• To recommend strategies for aligning loan products with seasonal agricultural cycles.
Research Questions
• How do seasonal agricultural cycles affect loan repayment patterns?
• What are the main challenges in managing seasonal income fluctuations among rural borrowers?
• What measures can improve the alignment of loan terms with agricultural cycles?
Research Hypotheses
• H1: Seasonal income variability significantly increases the risk of loan default.
• H2: Tailored repayment schedules improve loan performance during harvest periods.
• H3: Enhanced forecasting and financial advisory services reduce the impact of seasonal disruptions.
Scope and Limitations of the Study
This study focuses on GTBank’s rural loan portfolio in selected agricultural regions. Data are gathered from loan records, seasonal performance reports, and borrower interviews. Limitations include regional differences in climatic conditions and market fluctuations.
Definitions of Terms
• Seasonal Agricultural Cycles: The periodic phases of agricultural production that influence income patterns.
• Loan Performance: The effectiveness of loan repayment and overall credit health.
• Non-performing Loans: Loans where scheduled repayments are not met.
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