EFFECTS OF MICROFINANCE SERVICES ON THE PERFORMANCE OF SMALL HOLDER RICE (ORYZA SATIVA) FARMERS IN TARABA STATE, NIGERIA

This study examined the effect of microfinance services on the performance of smallholder rice farmers in Taraba State, Nigeria. Specifically, the study described the socio-economic characteristics of the respondents, examined the effect of microfinance services on farmers' performance, and identified the constraints faced in accessing credit from microfinance banks. A multi-stage sampling technique was employed to select 384 smallholder rice farmers for the study. Primary data were collected using questionnaires and analysed using descriptive statistics and multiple regression analysis. The results showed that the respondents were predominantly male (76.0%) and married (78.4%), with a mean age of 44 years, mean farm size of 2.24 ha, mean household size of 7 persons, and mean annual farm income of ₦1,087,650. The double-log model was selected as the lead equation based on its superior econometric properties (R² = 0.781, Adjusted R² = 0.777, F = 265.71, p < 0.01). The findings revealed that annual farm income, microcredit, micro-savings, and agricultural insurance had positive and significant effects on the performance of smallholder rice farmers, while interest rate had a significant negative effect. The findings revealed that annual farm income (β = 0.462; p < 0.01), microcredit (β = 0.214; p < 0.01), microsavings (β = 0.136; p < 0.05), and agricultural insurance (β = 0.071; p < 0.10) had positive and significant effects on the performance of smallholder rice farmers, while interest rate (β = -0.184; p < 0.01) had a significant negative effect. The major constraints limiting farmers' access to microfinance services were high interest rates (Mean = 2.67), inadequate collateral security (Mean = 2.60), complex loan application procedures (Mean = 2.53), delays in loan approval and disbursement (Mean = 2.49), and high loan processing costs (Mean = 2.46). The study concluded that improved access to affordable and efficient microfinance services enhances the performance of smallholder rice farmers, while high borrowing costs and institutional barriers continue to limit access to formal credit. The study therefore recommends that microfinance banks should reduce lending interest rates and provide flexible credit packages, adopt flexible collateral arrangements through group lending, simplify and expedite loan processing and disbursement, and collaborate with government and extension agencies to strengthen financial literacy while promoting microsavings and agricultural insurance among smallholder rice farmers.