The Impact of Credit on Traditional Farmers Production - (Analyzing the ABS Financing Activities in Traditional Rain-Fed Areas) (North Kordofan State)

Abstract

The purpose of this study is to investigate the impact of the agricultural credit, which disbursed by ABS, on the traditional farmers production in Shaikan Province, North Kordofan State. To achieve such purposes, tabular and descriptive statistics were applied to primary and secondary data which were collected through field survey in Shaikan Province season 2001-2002. Using multistage and simple random sampling technique. Ninety farmers were randomly selected as sample size. A logarithmic Cobb-Douglas production function that relates amount of yield to the factors of production was fitted to the data. The statistic analysis of socio-economic characteristics of the farmers revealed that, the majority of the farmers were within the productive age group and they were homogenous group with respect to that level of education. The analysis of the cost of production revealed that the cost of material inputs recorded the highest share relative to the total cost of production for both crops under study (i.e. sesame and groundnut). The budget analysis showed that the groundnut was more profitable than sesame. The analysis of current deposit of ABS revealed that, ABS suffered from poor saving mobilization problem. The analysis of accounting lending cost for ElObied branch revealed that its lending transaction cost was high while the profit margin rate charged was very low to cover that cost. The analysis of credit extended by ABS to the small traditional farmers revealed that the amount of loan per unit area was in adequate and not accessible to most small traditional farmers in the area of study. The results of the regression analysis indicated that the productivity, family size, total area planted, labor and rain fall were significant factors in explaining sesame yield variation. For groundnut the significant factors affecting yield were, productivity, family size, total area planted and labor involved in production. Also the result of the regression revealed that credit was insignificant factor in explaining the variation of both yield. Finally, the study recommended that: ABS has to continue and expand its small traditional farmers credit programme at least to assess the small farmers to remain in business at their villages. ABS should encourage rural saving mobilization. The lending transaction cost of ABS should be reduced by continuous training of the staff and using modern technologies. The profit margin rate charged to finance the agricultural sector must be periodically reviewed and adjusted by the Central Bank based on current conditions, because agriculture in Sudan is highly associated with risk and uncertainity with respect to the yield and price of crops. For the long-term ABS should identify and develop programmes in conjunction with the appropriate ministries and agencies that will result in greater productivity and return on investment for the traditional farmers. ABS must search and look for loans from external sources (i.e. international institutions and friendly countries) so as to finance the small farmers in the traditional rain-fed sub-sector