An Empirical Analysis of Loan Repayment Flexibility on Delinquency Rates of Cocoa Farmers in Cross River State

Abstract

This study examined the impact of loan repayment flexibility on cocoa farmers' delinquency rates in Cross River State, Nigeria, using a cross-sectional dataset. This was exigent given that delayed payment impacted banks’ portfolios and their capacity to extend more loans, not just to cocoa farmers but to farmers generally. Based on the study’s specific objectives of examining the repayment flexibility of the lending banks in the study area and analyzing its effect on delinquency, a questionnaire was administered to 92 cocoa farmers. Data obtained were analyzed using descriptive statistics and a probit regression model. The results revealed that all the banks offered flex loans to the farmers, and at least 41.3% of the farmers had a one-year moratorium after disbursement to start repayment, with repayment due when the crop was sold. In terms of the probit results, age (-.0102684, P<0.05), household size (.0331566, P<0.10), cocoa business experience (-.011093, P<0.10), loan amount received (4.96e-07, P<0.001), and the lending bank (.01768, P<0.10) had the greatest impact on delinquency rate, with household size having the highest – 3.31%. The implication is that larger cocoa farmers’ households have a greater chance of being delinquent or failing to repay their loans by 90%. Therefore, the paper suggests a redesign of the flex loan terms by the lending banks targeted at co-creating a sustainable future with the farmers by working on these impacting variables.