Iris Publishers - World Journal of Agriculture and Soil Science (WJASS)
Determinants of Savings Capacity among Agribusiness Entrepreneurs in Yobe State, Nigeria
Traditionally,
agriculture is seen as a low-tech industry with limited dynamics dominated by
numerous small family firms which are mostly focused on doing things better
rather than doing new things. Over the last decade, this situation has changed
dramatically due to economic liberalization, a reduced protection of
agricultural markets, and a fast changing, more critical, society. Agricultural
companies increasingly have to adapt to the vagaries of the market, changing
consumer habits, enhanced environmental regulations, new requirements for
product quality, chain management, food safety, sustainability, and so on.
These changes have cleared the way for new entrants, innovation, and portfolio
entrepreneurship. It is recognized by all and sundry that farmers increasingly
require entrepreneurship, besides sound management and craftsmanship, to be
sustainable in the future [1].
Over
the past 30 years, there has been a major shift in agricultural markets and the
international trade of agricultural products. The world is moving from local
and national markets towards a global system of trading, which means that
neighboring farmers working on small plots of land may be competing with large
industrial farmers from another country in a single marketplace. In developing
countries, there is increasing pressure on farmers to commercialize their
operations. This change is driven by the following factors:
• Declining land size, which means that farmers need more intensive production systems to support their family needs;
• Urbanization
and rapid population growth and
•
General modernization, which means that farming families need to generate
larger incomes to support their family needs and expectations in terms of
medical support, education, transport, communication and to cover the rising
costs of their cultural traditions.
In
order to meet the drive for greater commercialization, extensionists need to
develop new skills to support the agripreneur needs of farmers and other actors
in the value chain. For the farmer, this includes working with individual
farmers to develop farm plans, as well as working with various levels of farmer
organizations— from groups to cooperatives—in areas of market analysis,
financing, sales and building business opportunities for farming clientele.
Entrepreneurship,
value chains and market linkages are terms that are being used more and more
when talking about agriculture and farming. Many small-scale farmers and
extension organizations understand that there is little future for farmers
unless they become more entrepreneurial in the way they run their farms. They
must increasingly produce for markets and for profits. A farmer-entrepreneur is
someone who produces for the market. A farmer-entrepreneur is a determined and
creative leader, always looking for opportunities to improve and expand his
agribusiness. A farmer-entrepreneur likes to take calculated risks and assumes
responsibility for both profits and losses. A farmer-entrepreneur is passionate
about growing his business and is constantly looking for new opportunities.
Farmer-entrepreneurs are also innovators, who always look for better and more
efficient and profitable ways to do things. Being innovative is an important
quality for a farmer-entrepreneur, especially when the business faces strong competition
or operates in a rapidly changing environment.
In
most recent times, the emphasis on agri-food chain coordination, value creation
and the institutional setting under which chains operate, have significantly
increased the importance of the agribusiness sector. However, the scenario
appears different in Nigeria due to neglect and perceived under development of
the agribusiness sector, which has retarded poverty alleviation in the country.
Capital
accumulation and savings are regarded as the engine of growth in any country.
Unfortunately, the relative poverty of the rural agribusiness entrepreneurs in
Nigeria hampers savings and investment potentials and this together with the
poor attention from the government have continued to perpetuate low growth and
productivity in the food and agricultural sector of the country.
Sustainable
growth in any sector of an economy is a function of capital accumulation and
increased savings. Unfortunately, the relative poverty of the rural
agribusiness entrepreneurs in Nigeria hampers savings and investment potentials
which retard growth and productivity in the food and agricultural sector of the
economy. Leads to Savings to a large extent determine the growth rate of the
productive capacity and output. It is the views of Egwu & Nwibo [2], that
the lack of access to productive resources and low returns to agricultural
production as well as the bureaucracy involved in opening bank account are some
of the limitations to the saving capacity of agribusiness entrepreneurs. In a
bid to save, some of these entrepreneurs prefer to loan out their cash after
sales to reap interest, invest in livestock, store their produce after harvest
when prices are low and sell during lean period when prices will rise.
Having
recognized the importance of savings in the growth and development of an economy,
it becomes imperative to look at the determinants of savings capacity of
agribusiness entrepreneurs in the country in an effort to develop the food and
agricultural sector. The understanding of these determinants will spur
innovative decisions from stakeholders in the country responsible for
agribusiness development to come up with strategies that will improve the
sector’s performance.
The
main objective of this study was to examine the determinants of savings
capacity among agribusiness entrepreneurs in Benue State. The specific
objectives were to describe the types of savings prevalent among agribusiness
entrepreneurs; and to identify and analyze the determinants of savings decision
among agribusiness entrepreneurs.
Theoretical
Framework
The
theoretical framework for this study is the collective Entrepreneurship Theory.
Collective Entrepreneurship has emerged as a new concept in the literatures of
economics, management and entrepreneurship [3]. It emerged as a strategy to
accrue economic benefits and improved market access [4]. Steward [5] was the
first person to put forward the concept of collective entrepreneurship based on
the result of his ethnographic research on high-performing work team. While
Stewart [5] is recognized for coining the concept of collective
entrepreneurship he didn’t relate the concept to the field of agriculture. Pal
[6] were the first to relate collective entrepreneurship to agriculture,
focusing on agricultural cooperatives. They defined collective entrepreneurship
as a form of rent-seeking behavior exhibited by formal groups of individual
agricultural producers that combine the institutional frameworks of
investor-driven shareholder firms and patron-driven forms of collective action.
Further, Pal [6] point out that for any form of a collective organization to
achieve the highest performance, members’ decisions about their own on-farm
activities and investments should be aligned with the cooperative. They posited
that this is the risk associated with collective entrepreneurship that
producers should be willing to take.
Farmer
organizations or farmer groups to which collective entrepreneurship applies are
common in Africa. By 2005, farmer organizations in Africa had grown to 70
(FANRPAN, 2005). The growth of farmer organizations in Africa emanated from
proactive response to be successful in pursuit of significant growth in a
rapidly changing economic, social and political environment [7]. Farmer
organizations help solve farmers’ collective action problems, that is, how to
procure inputs most efficiently and market their outputs on more favorable
terms than they could achieve by themselves [7]. Collective action has the
potential to organize smallholder farmers in developing countries in the wake
of agricultural market liberalization (Mukindia, 2014).
Although
collective entrepreneurship is considered as an appropriate tool for linking
smallholder farmers to markets and upgrading their socio-economic status, there
are potential problems which can undermine its effectiveness. These include low
institutional capacity, inadequate qualified personnel, low entrepreneurship
skills, lack of financial resources, lack of market information, lack of
communication and participation among members, patronizing the business
activity of the groups, control and support, mismanagement, financial scandals
and poor governance [8]. Collective entrepreneurship can play an important role
for rural development. However, farmer organizations or farmer groups are not
always successful, and there is a need to better understand under what
conditions of collective entrepreneurship is useful and viable. It is important
to study the group entrepreneurial behavior that enable farmers to address
market challenges.
Methodology
Study
area
The
study was conducted in Yobe State is located in the North-Eastern part of
Nigeria between latitude 12 °00′N 11 °30′, Longitude12 °N 11.5 °E. Potiskum
Local Government Yobe State was created out of the old Borno State in 1991 and
has seventeen local government areas. The study covered Potiskum Local
Government Area, where Agribusiness entrepreneurs abound in the state such as
suppliers of farm equipment, agro-chemicals etc. Also, agribusiness
entrepreneurs who are engaged in arable crop production like Maize abound as
well as those involved in Maize marketers, Sorghum, etc.
Sampling
technique and data collection
The
data for the study was collected from the respondents using a structured
questionnaire from 200 agribusiness entrepreneurs who are involve in the
production and marketing of Maize and Sorghum. The respondents were selected
using multistage sampling techniques to capture their determinants of savings
Data
analysis
The
data collected for the study were analyzed using descriptive statistics such as
frequency distribution, percentages to describe the types of savings prevalent
among respondents. Following Okeke and Mbanasor [9]. Logit model was used to
realize the determinants of savings decision among respondents.
Results
and Discussions
Types
of savings prevalent among respondents
The
distributions of agribusiness entrepreneurs according to their most preferred
institutions to save with are presented in Table 1. Analysis of Table 1 shows
that majority (53%) of agribusiness entrepreneurs regarded Asusu as their most
preferred institution to save their money. The policy of asusu is based on the
monthly collection of fixed amounts of money from member contributors and
loaning out the money to members on low interest rate (mostly 5%) and higher
interest rate to non-members (mostly 10%). At the end of the financial year,
both the accrued interest paid, and the principal contributions will be shared
among members. Agribusiness entrepreneurs prefer saving with asusu as there are
no conventional banks within their locality, provides them with benefits such
as loans, meat at the end of the year etc., provides them the opportunity to
know one another, perception of asusu as a way of life, their low literacy
level, their lack of trust for the bank system, and the ease of operation
associated with asusu. This finding was in consonance with Nwibo and Mbam [10],
Babani [11] that farmers make use of informal financial sectors to mobilize
savings and develop their rural communities because it gives them access to loans
that they cannot get from formal financial institutions due to lack of
collateral.
Furthermore,
Table 1 shows that 40% of agribusiness entrepreneurs saw conventional banks as
their second most preferred saving institution The preference of agribusiness entrepreneurs
to save in conventional banks can be attributed to the safety and ease of
accessibility of their money, and easy transaction between them and their
customers which they attach to saving with such banks. This finding is
corroborated by Haruna [12] who in a study on the determinants of saving and
investment in deprived district capitals in Ghana, reported that people prefer
saving in banks to “isusu” groups due to high security, trust and proximity.
The
result from Table 1 shows that the least preferred institution by the
respondents (64%) to save their money was Microfinance banks. The poor rating
of microfinance bank as an institution to save with by agribusiness
entrepreneurs can be attributed to the unavailability of such microfinance banks
within the locality of these entrepreneurs as well as the popularity of Asusu
and commercial banks. This finding is corroborated by Sukhdeve [5] who in a
study on informal savings of the poor: prospects for financial inclusion,
reported that majority of households park their saving in banks while the
remaining save their money in informal ways which offer easy access and
convenience.
The
Nagelkerke R square value of 0.603 indicates that exist a strong relationship
of 60.3% between the predictors and the predictions. The analysis also revealed
that none of the independent variables had a standard error (S.E) greater than
2.0 thus confirming the absence of numerical problem such as multicollinearity
among the independent variables
The
prediction success overall was 83.1% Thus, the independent variables could be characterized
as useful predictors distinguishing survey respondents who have deliberately
saved part of their earnings from survey respondents who have not deliberately
saved part of their earnings.
The
relationship between gender and likelihood of savings was Positive and
statistically significant at 5%. The positive sign of the coefficient is in
consonance with the a priori expectation, implying that if an agribusiness
entrepreneur is a male, he is 2.580 times more likely to save part of his
earnings [13]. Male agribusiness entrepreneurs often engaged themselves in
other income generating activities which increases their income and thus their
savings when compare to the female agribusiness entrepreneurs who devote much
of their earnings on their families, clothes, and jewelries. This finding
agrees with Ayenew [14] who indicated that female heads spends their money on
the purchase of jewelry, clothes, and crockery etc which reduces their income
and subsequently their savings. However, this finding is at variance with Shitu
[15] who revealed that rural women save more than their male counterpart.
The
coefficient of household size was significant at 5% and negatively related to
savings decision. The negative sign of the coefficient correlates with the a
priori expectation, implying that as the household size of agribusiness
entrepreneurs increases, they are 0.667 times less likely to save part of their
earnings. Large household size implies high dependency ratio and increase in
nonfarm business expenses such as hospital bills, children’s school fees,
social events or household consumables which translates to low savings among
agribusiness entrepreneurs. This finding is affirmed by Ike and Umuedafe [16]
who posited that large family size is among the major causes of fewer savings.
The
result also revealed a positive savings-income relationship, which was
statistically significant at 10%. This implies that as income increases, there
is greater probability of saving. This finding is supported by Konig, Silva and
Mhlanga [17] who posited that the higher the income, the more revenue the
farmer generates from his produce and hence, the more he is encouraged to save
part of his earning.
The
coefficient of membership of cooperative society was significant at 5% and
positively related to savings decision. The positive sign agrees with the a
priori expectation, implying that agribusiness entrepreneurs who are members of
cooperative society are more likely to save part of their earnings.
Cooperatives offer its members the opportunity to increase their monthly income
which translates to more savings through the social networking platform it
provides to its members.
The coefficient
of risk of capital loss was significant at 1% and positively related to savings
decision. The positive sign of the coefficient is in consonance with the a
priori expectation, implying that the perceived risk of capital loss among
agribusiness entrepreneurs will make them more likely to save part of their
earnings. Agribusiness entrepreneurs will likely embark upon precautionary
savings to provide an emergency cushion in case of a sudden loss of income or
an unexpected spike in expenditure. Khan and Hye [3] in a study on the
financial sector reforms and household savings in Pakistan corroborated this
finding by reporting that greater uncertainty increases savings as risk
aversion consumers set aside resources as a precaution against possible adverse
changes in income.
The
coefficient of working experience was found to be significant at 5% in
influencing savings in the study area. This implies that the more experienced a
respondent has in agribusiness activity, the higher the likelihood of savings. This
is expected because the more experience a respondent has, the better her skills
which will earn her more. This could also mean that knowledge gained over time
from working experience could make the agribusiness entrepreneur more efficient
and therefore more remunerated, that is, it is expected that the agribusiness
entrepreneur will accumulate physical assets with long working experience and
also save more. This finding agrees with Nwibo & Mbam [10] who in a study
on the determinants of savings and investment capacities of farming households
in Udi Local Government Area of Enugu State, posited that farmers with long
experience in farming tend to have wider experience and are more inclined to
saving and investment in agricultural activities whose rate of returns are
higher [18].
Conclusion
and Recommendations
The
result from the study shows that majority of the respondents prefer Asusu as
their mode of saving. Also, evidence from the study indicates that the
socio-economic characteristics of the agribusiness entrepreneurs significantly
influence the probability that they will save.
Based
on the findings of the study, the following recommendations were made:
•
Policies geared towards improving the savings of agribusiness entrepreneurs
should inculcate their socioeconomic characteristics in its formulation to
ensure better result.
• With
the preference for Asusu, Formal financial institutions should develop a
synergy to partner with Asusu in order to mobilize savings among agribusiness
entrepreneurs in study area.
•
There should be an aggressive campaign geared towards promoting the benefits of
savings as well as the dangers of not saving should be encouraged especially in
the areas of these entrepreneurs
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