University of Khartoum

The Demand for Credit for the Production and Marketing of Sorghum Case ofEl Gadaref and North Kordofan States: Sudan

The Demand for Credit for the Production and Marketing of Sorghum Case ofEl Gadaref and North Kordofan States: Sudan

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Title: The Demand for Credit for the Production and Marketing of Sorghum Case ofEl Gadaref and North Kordofan States: Sudan
Author: Abdel Whab EL Beshier Ali Attia
Abstract: This study is concerned with the problems related to the high demand for agricultural credit. It aims at identifying, inve-stigating and estimating the factors Influencing demand for credit loans at both production and marketing, namely inve-ntory credit loans to farmers. It addresses the rain-fed sub-sectors (mechanized and traditional). The brief summary of the problems are: Despite the considerable interest shown by the government to further formal credit, larger sectors of producers continue to suffer from shortage of financial resources. For instance, the average percentage share of financing requirements by the agricultural sector met by formal financial institutions for the period 1992-2001 was 25 percent of the estimated costs of production. This indicates that there is a financial gap and that the prevailing credit delivered by the formal financial system is limited and inadequate to fulfill this high demand for credit. Several deficiencies which need to be addressed in order to allow small farmers to attain higher share of the consumer’s price include among others, lack of marketing credit namely inventory credit. The main objective of the study is: to identify and estimate the factors influencing demand for agricultural credit loans. The specific objectives are to analyze sorghum prices to identify seasonal pattern and expected changes in these patterns over-time, which may help in the availability of inventory credit loans and feasibility of storage; and to identify and estimate the demand for inventory credit loans at farmer level. The study is based on primary data gathered through a field survey in both the semi-mechanized and the traditional rain-fed sub-sectors. Secondary data collected from different sources were also utilized. To estimate the factors influencing demand for agricultural credit and inventory credit loans the method of ordinary least squire (OLS) was employed. The main results of the study inculde: There is a high demand for credit loans for production in the rain-fed sub-sectors especially in the traditional one. Loan demand for production in both the semi-mechanized and the traditional rain-fed sub-sectors is inelastic with respect to all variables including interest rate. Loan demand for production is observed to be highly influenced by the ability and capacity of a borrower to specialize in farming (i.e. farm size and agricultural production inputs). The amount of loans delivered to farmers as inventory credit loans is very low and mainly obtained from formal financial institutions. Demand for inventory credit loan is inelastic with respect to storage availability, interest on value of stored product, and storage cost variables. The temporal price analysis demonstrates the importance of having reliable and timely market information which needed for better forecasts of prices. Based on the results and the relevant conclusions the main recommendations are: The policymakers need to adopt land tenure policy which allows farmers to registered their land and use it as collateral for finance, especially in traditional rain-fed sub-sector. Policy-makers need to establish a financial mechanism such as revolving fund to finance small scale enterprises for the development of off-farm activities (including income genera-ting activities e.g. small crafting, petty trading, etc.) in the rain-fed sub-sectors especially in the traditional one. This may help farmers to diversify their incomes and create job opportunities in the off-season. The policymakers need to adopt land tenure policy which allows farmers to registered their land and use it as collateral for finance, especially in the traditional rain-fed sub-sector. To reach small farmers in the rain-fed sub-sectors, policy-makers need to establish special bank for small farmers following the experience of other countries such as Bangladish. To overcome liquidity problems at the beginning of the season in the rain-fed sub-sectors and to have a timely credit delivery, government need to increase the capital of the specialized banks like Agricultural Bank of Sudan and Farmer Commercial Bank. Collection of better and timely market information is a very important factor to reduce random fluctuation in prices and assist formal financial institutions to deliver more inventory credit loans to farmers. In case of inventory credit, policymakers need to encourage investment in the storage facilities and other services with special concessions in the Investment Act Policy with food security crop and crops of export potentials.
Description: 167 Pages
URI: http://khartoumspace.uofk.edu/handle/123456789/12086
Date: 2015-06-14


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