Title page                                                                                    i

Certification                                                                                            ii

Dedication                                                                                                 iii

Acknowledgement                                                                              iv

Table of contents                                                                               vi

List of tables                                                                 viii

List of figures                                                                           ix

Abstract                                                                                  x


  1. Background information                                                                1
    1. Problem statement                                                                           5
    1. Purpose of the study                                                               7
    1. Hypothesis                                                                       7
    1. Significance of the study                                        7


  • Concept of rural finance                                                       9
    • Financial interventions in rural areas of Nigeria                 10
    • Paradigm shift in agricultural financing                                       21
    • Rural Finance Institution Building Programme           22
    • Concept of food security                 25
    • Constraints to utilizing rural finance services             35
    • Strategies for improving rural finance services       39
    • Concept of impact evaluation                                   44
    • Theoretical framework                                         47
    • Conceptual framework                                              56


  • Study area                                                            59
    • Research design                                                  60
    • Population and sampling procedure                                            60
    • Instruments for data collection                                    62
    • Measurement of variables                                            62
    • Data analysis                                                                          66


  • Socio economic characteristics of the respondents          68
    • Food security status of beneficiaries and non-beneficiaries 79
    • Impact of RUFIN on beneficiaries’ socioeconomic possessions 83
    • Perceived constraints to utilisation of RUFIN services             88
    • Possible strategies to improve RUFIN programme                93


  • Summary                                                                              95
    • Conclusion                                                       99
    • Recommendations                                         99

Reference                                                                                             101

Appendix A                                                                          109

Appendix B                                                          115


Table 1: Comparing old to new paradigm for rural and agricultural finance    22

Table 2: Socio-economic characteristics of the respondents         72

Table 3: Features of RUFIN beneficiaries’ loan             75

Table 4: Influence of socio-economic factors on amount of loan obtained 77

Table 5: Influence of socio-economic factors on the numbers of loan obtained                    78

Table 6: Sources of information on agricultural activities   79

Table 7: Food security status of the respondents   80

Table 8: Difference in the food security status of RB and NRB        83

Table 9: Impact of RUFIN on beneficiaries’ socioeconomic possessions85

Table 10: Impact of RUFIN on beneficiaries’ socioeconomic life    87

Table 11: Difference in the socio-economic characteristics of RB and NRB      88

Table 12: Perceived constraints to utilisation of RUFIN services 91

Table 13: Factors constraining beneficiaries from utilizing RUFIN services 93

Table 14: Possible strategies to improve RUFIN programme  94


Figure 1: Schema, showing the impact of RUFIN on the beneficiaries 58

Figure 2: Map of Anambra State          60

Figure 3: Food security status of RB and NRB         81


The overall purpose of the study was to evaluate the impact of rural finance institution building programme on the socio-economic life of beneficiaries in Anambra State, Nigeria. Specifically, the study determined the food security status of the beneficiaries and non-beneficiaries; the impact of RUFIN on beneficiaries’ socio-economic life; ascertained the perceived problems of beneficiaries in utilising RUFIN services; and identified possible strategies for improving performance of RUFIN. The study was carried out in Awka North, Orumba North and Ayamelum LGAs of Anambra State, Nigeria. Reflexive and matching method of quasi-experimental design was used. About 60 RUFIN beneficiaries and 60 non RUFIN beneficiaries constituted the population. Multistage sampling technique was used in selecting respondents. Data were collected using interview schedule. Descriptive and inferential statistics were used in data analysis. The findings revealed that the majorities of RB and NRB were female. The mean age of RB and NRB were 42.7years and 40.3years, respectively. Also, the majorities of RB and NRB were married. About 95% and 98%of RB and NRB, respectively were literate. The average household size of 6 was obtained among RB and RNB. About 55% and 57% of RB and NRB, respectively were into farming as major occupation. The average years of farming experience for RB and NRB were 17.3 and 15.9, respectively. Average amount of loan obtained by beneficiaries was N67, 266.70 at an average payback period of one year. On the average, RB obtained loan once since programme inception. The findings revealed that sex and years of farming experience significantly influenced the amount of loan obtained while age, significantly influenced the numbers of loan obtained by beneficiaries. The result revealed that the majority relied on friends/neighbour as source of information on RUFIN. Friends/neighbour was also the most used source of information on agricultural activities by non-beneficiaries. The results show that the majority of RB and NRB were food insecure. The findings show that RB significantly differed from NRB in the nature of food eaten in the household. The result reveals that RB were better-off than NRB; though insignificantly, in the following areas: total farm size owned in hectares, total annual income from trade, number of motorcycle owned, number of radio set owned, number of mobile set owned, number of generator owned, number of fan owned, number of personal house, number of rooms occupied, number of mattress owned, number of furnished chair owned, number of association belonged, number of rabbit owned, number of pig owned, and number of livelihood means. The findings also show that non-beneficiaries were significantly better than beneficiaries in the number of poultry owned and total annual income from farm. The result further shows that there were significant differences in favour of RB in the following items: access to financial institutions for loan, level of living when compared to others in the community, access to extension services, ease in marketing farm produce, access to modern farm inputs, access to tractor services, and access to education. The findings show that small in size of loanable amount, high interest rate, unavailability of loan when needed, short period of payback, and high initial deposit were major constraints to utilisation of RUFIN services. Also, the responses of the farmers on the constraints were extracted and named loan term constraints, managerial constraints and system embedded constraints. The major possible strategies to enhancing utilisation of RUFIN services among farmers were giving farmers loan at subsidised rate, strengthening the legal backings of group activities, exposing farmers to financial literacy trainings, trainings on possible areas of income diversification, increasing the volume of loanable amount, promotion of policy on the establishment of commercial banks in rural areas, access to loan from financial institutions on a personal basis,  making loan interest free, and increase in length of payback.



1.1 Background information

Rural finance encompasses the full range of financial services such as loans, savings, insurance, payment and money transfer services, offered by formal and informal financial institutions and used in rural areas by households and enterprises as a means of improving or sustaining their livelihood choices (Making Finance Work for Africa, 2008). It includes agricultural finance, which refers to financial services ranging from short, medium, and long-term loans, leasing, to crop and livestock insurance and covering the entire agricultural value chain. Agricultural finance is dedicated to financing agriculture related activities such as input supply, production, distribution, wholesale, processing and marketing (FAO, 2016).

Absence of efficiently operating rural financial institution is a serious constraint on sustainable rural economic growth in Africa (International Bank for Reconstruction and Development, 2003). This is because two thirds of Africa’s populations are resident in rural areas and requires adequate finance for their economic activities which are mostly agriculture based (International Labour Organization, 2014). The Food and Agricultural Organization (FAO) (2004) points out that lack of access to finance in rural areas and in the agricultural value chain could be linked to slow and uneven entry of formal financial institutions into rural areas. The FAO added that, factors such as poor infrastructure and widely dispersed populations in rural areas raise transaction and information costs, thus further hindering the spread of financial services. In addition, title and property rights can be difficult to verify in rural areas, posing problems in the use of collateral to obtain fund. Subsidized lending programmes for rural recipients, seasonal nature of farmers’ income, long maturation period of farm produce, and high risk factor associated with farming have also contributed to obstructing the development of a sustainable rural banking sector (FAO, 2004).

Despite these difficulties, formal rural and agricultural finance have been making advances in Africa, with innovative financial services and improved risk management on both the client and institution sides with the sole aim of bringing buoyancy and stability to rural economy. The most promising approaches include flexible credit schemes, value-chain finance, insurance products, promotion of financial literacy and the use of new technologies like GPS mapping (FAO, 2004). Prominent examples are the introduction of index-based weather insurance schemes in Malawi, financial literacy campaigns in Ghana, the spread of mobile banking in Kenya (FAO, 2004) and the Rural Finance Institution Building Programme (RUFIN) in Nigeria (IFAD, 2008).

While it is well understood in Nigeria that financial exclusion of the rural population stunts development, fewer than 2% of rural households in Nigeria are estimated to have access to any sort of institutional finance (World Bank, 2008). A study by Obanasa and Maduekwe (2013) cites the improvement of financial systems as a key growth pillar for the agricultural sector. Lack of rural access to financial services in Nigeria not only retards rural economic growth, but also increases poverty and inequality (World Bank, 2008).  Financial access increases incomes through productive investment, helps create employment opportunities, facilitates investments in health and education, and reduces the vulnerability of the poor by helping them to smooth their income patterns over time (World Bank, 2008). 

Aside from the launching of Federal Ministry of Agriculture and Rural Development (FMARD) in 1966, to cater for rural development projects and programmes in Nigeria, the following are efforts by Nigerian government in achieving sustainable rural finance: establishment of the Nigerian Agricultural and Cooperative Bank (NACB) in 1973, Rural Banking Programme (RBP) in 1977, People’s Bank of Nigeria (PBN) in 1989, Community Banking System (CBS) in 1990, Self-Help Groups (SHG) Linkage Programme in 1991, Family Economic Advancement Programme (FEAP) in 1994. Efforts made after 1990’s include: establishment of Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) in 2000 now known as Bank of Agriculture (BoA), Trust Fund Model (TFM) in 2001, National Poverty Eradication Programme (NAPEP) in 2001, Small and Medium Enterprises Equity Investment Scheme (SMEEIS) in 2001, Agricultural Credit Support Scheme (ACSS) in 2006 (World Bank, 2008), and RUFIN in 2006 (IFAD, 2008). Some of these programmes ended without achieving the core objective for which the programmes were launched. This is evident in the current level of poverty in the rural areas which stood at 80% as at 2012 (IFAD, 2012) as against 41% in 1985, 49% in 1992, and 51% in 1996 (Aigbokhan, 2000). The failures could be linked to incoherence and/or default in implementation of programmes policy documents. It could also be associated with lack of clarity on the extent to which evaluation have informed evidence based policy.

Evaluation refers to objective assessments of a planned, ongoing, or completed project, programme, or policy. It is the systematic review and assessment of the benefits, quality and value of a programme or activity (Ajayi, 2005). According to FAO (2003), evaluation is purposely done to determine achievements of development programmes vis-a-vis the set aims / objectives. Food and Agricultural Organization (2003) also pointed out that evaluation techniques can serve to improve implementation and efficiency of programmes after interventions have begun, provide evidence as to the cost efficiency and impact of a specific intervention within and between policy sectors. Evaluation especially continuous / on-going and stage by stage evaluation are important because they expose lapses associated with achievement of programme objectives thereby affording opportunities for adjustment.

Impact evaluation on the other hand, assesses the intended and unintended changes that can be attributed to a particular intervention after about 5 to 10 years of existence (World Bank Group, 2012). Impact evaluation is structured to answer the question: how would outcomes such as participants’ well-being could have changed if the intervention had not been undertaken? It seeks to answer cause-and-effect questions. In other words, impact evaluation looks for the changes in outcome that are directly attributable to a programme (Gertler, Martinez, Premand, Rawlings and Vermeersch, 2011).

Rural Finance Institution Building Programme which was initiated in 2006 and became effective in 2010 is currently in its impact year (RUFIN, 2011). The programme is a strategic means by which the rural micro financing sector will be developed and strengthened in order to deliver adequate, efficient and sustainable financial services to the rural poor. The objective of the programme is to develop and strengthen the performance of member-based non-bank rural finance institutions to enable them develop to sustainable Rural Microfinance Institutions (RMFIs) and establish linkages between them and formal financial institutions in Nigeria. Rural Finance Institution Building Programme lays the foundation for the long-term development of a sustainable rural financial system that will eventually operate throughout the country (FMARD, 2015; Nigerian Investment Promotion Commission [NIPC], 2015; RUFIN, 2011).

It is being financed by the International Fund for Agricultural Development (IFAD), the Ford Foundation, the Federal Government of Nigeria, state governments of Nigeria, Central Bank of Nigeria (CBN), participating banks and micro finance institutions (MFIs) in Nigeria (IFAD, 2015; RUFIN, 2010). Under the programme, the following categories of non-bank micro finance institutions i.e. cooperative societies, unions and cooperative finance agencies, neo micro finance institutions and grassroots/informal finance institutions, would be supported in the needed areas of capacity building and access to loanable funds with appropriate linkages to micro finance banks/institutions and commercial banks for credit delivery to the rural populace (FMARD, 2015; RUFIN, 2010).

Rural Finance Institution Building Programme is currently operational in 12 Nigerian states with 3 LGA from each of the states in participation (36 LGA are involved in the federation). Participating states in the north-west / north-east zone are Adamawa, Bauchi, Katsina, and Zamfara State, while Benue, Nasarawa, Lagos, and Oyo States are participating in south-west / north-central zone and Anambra, Imo, Edo, and Akwa-Ibom States are in the south-east/ south-south zone (NIPC, 2015; RUFIN, 2011).

The programme is coordinated by a central programme unit based in Abuja and is assisted by three zonal programme management units (ZPMU), which are; ZPMU in Owerri, Imo State covering south-south and south-east Zones, ZPMU in Ibadan, Oyo State covering north-central and south-west zones, and ZPMU in Bauchi State covering north-east and north-west zones. Each participating state has a programme support office and is headed by an assistant micro finance officer and assisted by a data management officer (NIPC, 2015). Rural Finance Institution Building Programme with the structure elucidated in a manner that will allow for efficiency, demands an assessment in line with the programme goal of enhancing rural livelihood in which finance is a key component.