Agricultural Finance and Factors leading to Delinquency in the semi-mechanized rain-fed sub-sector A case of Gedarif State farmers –Sudan

Abstract

A study was conducted mainly to assess the reasons for inability of farmers in Gedarif State to repay their loans. The main causes of low productivity were also considered. Primary data were collected through field surveys in the mechanized rainfed areas. A total of 218 respondents were interviewed in two successive seasons (2003/04 and 2004/05). Secondary data were gathered from different agricultural sources and banks. The analytical techniques used were: cash-flow analysis to check the debt repayment capacity of the farmers, regression analysis to study the impact of various factors on yield, demand and default rate. Correlations and descriptive methods were used to show the general performance of the respondents. The results revealed that farmers of low or zero yield and no other off-farm income or cash from other sales were subjected to default problems, and therefore the cash balance will be negative. Regression analysis showed that sorghum area and sorghum cost of production have significant positive impact on the amount of credit. Default repayment rate was negatively affected by sorghum area and sorghum yield (regression coefficients were 0.009 and -12.199, respectively. Climatic conditions, mainly rainfall, were the main determinants of sorghum yield. V The correlation matrix showed that there is a negative correlation between sorghum yield and default repayment rate. This implies that high yield means better repayment in kind and hence low default problems. Sorghum area and sorghum cost of production were positively correlated with the default repayment rate. This indicated that large areas means high variable expenses and low repayment capacity. The study showed that farmers' age (about 38%) ranged between 31 and 50 years and about 40% of farmers had secondary school level of education. About 56% of farmers possess projects with areas ranging between 1000 and 2500 feddans. The majority of these areas were mainly under sorghum. The results indicated that 48% of the respondents depended mainly on credit for agricultural production. The study recommended the use of new technologies (or technical packages with high yielding varieties and good husbandry practices) to increase crop yield, agricultural insurance for risk management, supply of credit (according to the pre-estimation of cost of crop production) at the optimum time, improved price policy and government support (by reducing the production taxes). Also, screening and selection of borrowers who used to, or are expected to, repay their loans immediately after harvesting was recommended.