Effect of Microcredit on Poverty Reduction among Rural Farm Households in Northeast, Nigeria

Abstract

The paucity of empirical evidence to show the correlation between microcredit and poverty reduction in North-East, Nigeria led to the study on the effect of microcredit on poverty reduction among rural farm households. Multi-stage random and purposive sampling techniques were employed to select 200 farm households who constituted the sample size. Data were collected primarily using structured questionnaire and analysed with the aid of descriptive and inferential statistics. The results showed informal microcredit as the major source of credit for farm households. The result further indicated that 46% of the loan applied for was disbursed, resulting to 47% rise in farm household’s income. Meanwhile, 62% of farm households surveyed were poor with poverty depth of 0.43 and poverty severity at 0.38. The regression analysis on the effect of microcredit on the income of the farm households revealed that the coefficient of income was positive and statistically significant at 1% probability. The effect of microcredit on the poverty profile of farm households revealed that microcredit exerts negative influence on poverty profile of farm households in the study area. The study recommends: the establishment of robust rural credit scheme in rural areas; and institution of policy framework that will enable poor rural households without appropriate collateral to access funds for farm and non-farm activities.