CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Nigeria is endowed with natural resources, large fertile farmland, wide range crops, and river amongst others. Despite its abundant natural resources it is faced with poor food situation. The poor food situation is traceable to the decline in the agricultural sector. The problem of feeding and provision of natural resources is increasing by the day. However several efforts are being made to improved the standard.

Prior to the discovery of petroleum in Nigeria agriculture used to be the highest foreign exchange resources earner and contribution to gross domestic product GDP has been estimated to about  62.63% in 1960, 48.08% in 1970s, and 20.63% in 1980. Recently due to the growing awareness of the role of agriculture, the various governments have intensified efforts aimed at transforming from its present subsistence level to a market oriented production. One of those efforts was the ban made on importation of agricultural products like palm oil, maize and rice. This was done to encourage improvements on our production standard.

Due to the fall in the level of production from decade to decade, the country could no longer feed the large population, provide raw material for domestic-industries, engage in export of agricultural produce and employ the labor  force of the country despite the abundance of human and material resources.

In spite of growing urbanization, Nigeria is known to be predominantly rural in natural and majority of population is dependent directly or indirectly on agriculture for their live hood. Credit delivery is perhaps one of the most important roles of microfinance banks, as the loans extended are used to expand existing businesses and in some cases to start new ones. According to CBN (2008) microfinance loans granted to clients is increasing from 2007 to date and most of it goes to financing micro-enterprises in rural areas.

Ketu (2008) observed that Microfinance banks have disbursed more than eight hundred million micro-credits to over 13,000 farmers across the country to empower their productive capacities. As such it is expected that agricultural output will increase with the increase in finding. The entrepreneurial capacity of the farmers we thus improve.