An appraisal of interest rate policies on agricultural loan uptake: a case study of Access Bank Nigeria
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Background of the Study
Interest rate policies are critical in shaping borrowing behaviors, particularly in the agricultural sector where access to credit is a key determinant of productivity. In Nigeria, Access Bank has implemented various interest rate policies aimed at making agricultural loans more accessible and affordable for rural farmers. These policies are designed to balance risk management and profitability while promoting inclusive growth in the agricultural sector (Chukwu, 2023). Lower or subsidized interest rates can stimulate loan uptake by reducing the cost of borrowing, thereby enabling farmers to invest in modern farming techniques, purchase quality inputs, and expand their operations.
Over recent years, the effectiveness of these interest rate policies has been the subject of extensive analysis. Research indicates that favorable interest rate environments contribute to higher loan uptake and improved agricultural output. Access Bank’s targeted approach includes special loan schemes with competitive interest rates for the agricultural sector, combined with flexible repayment terms to accommodate the seasonal nature of farming (Oke, 2024). These initiatives are complemented by advisory services and capacity-building programs that aim to improve farmers’ financial management skills. As a result, the bank has positioned itself as a key facilitator of agricultural development and rural economic empowerment.
Despite these positive developments, challenges persist. Fluctuations in global commodity prices, inflationary pressures, and occasional policy inconsistencies can undermine the intended benefits of low interest rate schemes (Adewale, 2024). Furthermore, while reduced interest rates improve affordability, they may also lead to increased credit risk if not accompanied by robust risk management measures. This study examines the impact of interest rate policies on the uptake of agricultural loans at Access Bank Nigeria, assessing the effectiveness of these policies in promoting sustainable agricultural growth and financial inclusion.
Statement of the Problem
Despite the implementation of favorable interest rate policies, agricultural loan uptake in rural Nigeria remains inconsistent. One major problem is the volatility of economic conditions, which can erode the benefits of low interest rate schemes by increasing the overall cost of credit in times of inflation and market instability (Ibrahim, 2023). Additionally, inconsistent policy implementation and regulatory uncertainties contribute to borrower hesitancy, as farmers may be reluctant to take on loans if interest rates are perceived as unstable or unpredictable (Umeh, 2024).
Another challenge is the limited financial capacity of smallholder farmers, who often face difficulties in meeting collateral requirements and repayment schedules even when interest rates are low. This constraint reduces the overall effectiveness of interest rate policies in stimulating loan uptake. Moreover, while reduced interest rates improve affordability, they may inadvertently lead to higher credit risk if borrowers are unable to manage their debt levels responsibly. The lack of comprehensive financial literacy and advisory support further compounds these challenges, leaving farmers ill-equipped to fully benefit from available loan schemes (Afolabi, 2025).
This study seeks to address these issues by evaluating the impact of Access Bank Nigeria’s interest rate policies on agricultural loan uptake. The research will identify the key barriers that prevent farmers from accessing credit, assess the overall effectiveness of current interest rate structures, and propose recommendations for enhancing loan accessibility while mitigating associated risks.
Objectives of the Study
• To evaluate the impact of interest rate policies on agricultural loan uptake.
• To identify barriers that limit the effectiveness of low interest rate schemes.
• To recommend policy improvements for enhancing credit accessibility and risk management.
Research Questions
• How do interest rate policies affect agricultural loan uptake among farmers?
• What are the primary barriers to credit access despite low interest rates?
• What strategies can improve the sustainability of agricultural loan schemes?
Research Hypotheses
• H1: Favorable interest rate policies significantly increase agricultural loan uptake.
• H2: Financial literacy mediates the relationship between low interest rates and credit utilization.
• H3: Enhanced risk management practices improve the sustainability of agricultural loan programs.
Scope and Limitations of the Study
This study focuses on Access Bank Nigeria’s agricultural loan schemes from 2023 to 2025. Limitations include economic volatility and variations in borrower profiles.
Definitions of Terms
• Interest Rate Policies: Regulations governing the cost of borrowing funds.
• Agricultural Loan Uptake: The rate at which farmers access credit facilities.
• Credit Risk: The potential for financial loss due to borrower default.
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