Determinants of loan repayment among bank of agriculture loan beneficiaries in South East, Nigeria

Abstract

This study examined the determinants of loan repayment among beneficiaries of the Bank of Agriculture (BOA) in South-East Nigeria. Specifically, it described the socio-economic characteristics of beneficiaries, identified factors influencing loan repayment, and highlighted constraints militating against effective repayment. Primary data were obtained through structured questionnaires administered to 270 beneficiaries selected through a multi-stage sampling technique combining purposive and random procedures across Anambra, Enugu, and Imo States. Data were analyzed using descriptive statistics and an Ordinary Least Squares (OLS) regression model. Results indicated that 65.6% of beneficiaries were male and predominantly married, with a mean household size of six persons. Farming was the major occupation, with an average farm size of 1.5 hectares and a mean farming experience of 12 years. Regression results revealed that age, educational attainment, farm size, farming experience, farm income, distance to the bank, interest paid on loan, value of collateral, and loan amount significantly influenced loan repayment performance. Major financial constraints identified included high interest rates, delays in loan processing, untimely disbursement of approved loans, stringent collateral requirements, limited loan amounts, and short repayment periods. These challenges adversely affected beneficiaries’ repayment capacity and overall loan performance. The study recommends that the Bank of Agriculture develop and implement an efficient loan disbursement framework to ensure timely release of funds, reduce loan diversion, and strengthen beneficiaries’ capacity to meet repayment obligations.