CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION
Economist always say that human beings behavior are rational that is, they are classified and directed at some specific point, devoid of unnecessary emotions and sentiments. In the same line of thought when a group of persons decided to join or form a co-operative society, they do so with some rationale behind their intention and or action (Sanusi, 2003).
Economics reasons constitute the major motive why people join or form co-operative. It is an attempt to improve one’s income by carrying out more economic activities or improving on the performance of the present enterprise of the individual. By so doing, the member’s economic position is increased. A tailor who joins a tailors’ co-operatives society has among other reasons the economic motive(Bog-Igwe, 2007).
Co-operative action takes place when individuals pool their resources together which are often meager in an effort to obtain what is needed by all but can not be obtained by the use of an individual’s resources, talents, time, information or effort. This habit has existed since the origin of humanity, that is, since the time that human beings started living together on the basis of family unit and or in a community. Co-operation is customary and instinctive solidarity. The first co-operative act of man was when the first human family started gathering food even before agriculture was invented (Mbat, 2000).

The more advanced forms of traditional co-operation is demonstrated in saving and lending, joint action, joint possession of land. They did not leave life’s risks and emergence to chances. They developed various patterns of mutual assistance, reduced them to custom, and handed them down as tradition and as a legacy from the past through formal and informal education.
1.2 BACKGROUND TO THE STUDY
All over the world, cooperatives are instrumental in social and economic transaction. The relevant social aspects of people from Africa are those aspects that deal with their attitudes of life and themselves, their mode of behavior with others as well as their norms and customs (Ijere, 1992).
Farm settlement and cooperative business used to be the main stay of the Nigerian economy, but as oil assumed greater significance, the sector become neglected. This situation may be attributed to poor business technology, low investment in the sector, drought and business financial losses. One of the major factors accounting for this poor cooperative business development is the inaccessibility of credit to the cooperative enterprises that dominate the nation’s agribusiness (Olayide, 1999).
Although credit itself does not enhance agribusiness cooperatives performance except properly invested and managed that it yields the expected result (Umebali and Mgbada, 2002), it is considered to be an essential input for increased productivity, boost income levels, and encourage employment and thereby alleviating poverty. Credit enhances this by enabling poor people to overcome their liquidity constraints while undertaking investment (Nathan, 2009).

Microcredit can play an important role in increasing access to basic social services and enhance the well being of the very poor people and when this occurs, productivity is enhance (Mbat, 2000). Lack of access to credit is generally seen as the main reason people in developing economies like Nigeria (Niels and Roberts, 2007). Usually, the poor have no access to loans from the banking system, because they cannot put up acceptable collaterals. These problems of credit can be solved through the information of cooperatives.
Agribusiness cooperatives and microcredit are interdependent and mutually re-enforcing and hence date back to the beginning of mankind. Before the advent of formalized institutional source of financing, agricultural credit took the form of borrowing from friends, relatives, neighbors and so on, with its attendant term either in the form of selling products to the lender at a future date and price or repayment at some agreed value (Fafchamps, 1999).
Prisma (2006) identified microcredit as a powerful development tool with which to eradicate poverty by providing financial services to the poor. The microcredit industry has been growing more than 25% a year during the last decade. Nonetheless, only a fraction of the demand has been met to date. Specifically, successive governments in Nigeria have in the last three decades shown much interest in ensuring adequate financing for agriculture by establishing various schemes and specialized financing institutions to provide appropriate finance to the sector (Sanusi, 2003).
Easy access to credit for agribusiness cooperation development by members would result to increase in production and income of the household. A well established and smoothly functioning agribusiness cooperative in Nigeria will play vital role of savings-investments processes. The essential spontaneous and voluntary emergence of agribusiness cooperatives constitutes part of the reason for their sustainability. The success of these groups in saving mobilization of proceeds of the business activity depends on their structures, forms, their service delivery mechanisms, low transaction cost, best convenience, flexibility and trust (Sanusi, 2003).
Agribusiness cooperatives in developing economies have not performed efficiently as a result of so socio-economic, political constraints and other problems militating against their performance. World Bank Survey (1999) showed that poor performance of agribusiness cooperatives in most nations like Nigeria was as a result of the public policy structure that did not provide the right incentives for growth. More so, serious inefficiencies characterized the activities of most agribusiness cooperative society in developing nations, which is as a result of infrastructural inadequacies (World Bank Survey, 2000).
HISTORICAL BACKGROUND OF THE CASE STUDY FISH FARMING AGRICULTURE SOCIETY IN EPE LOCAL GOVERNMENT OF LAGOS STATE
Area of study: Lagos State (Epe Fish Farming Agriculture Cooperative Society).
The choice of the study area is purposive. Lagos state is located along the coastal and marine areas which are covered with big water bodies that are very rich in aquatic life, especially fishes which are in high demand in the country. It is also the commercial capital of Nigeria. Epe Local Government is used for the study because the area provides opportunities for shallow water and deep sea fishing and trawling. This, coupled with its proximity to a metropolis, makes it especially suitable for the study. Multi stage sampling technique was used to select the sample size. The first stage involved the selection of a district – Epe Central – which was further divided into two sections; Epe riverine and Epe upland. The second stage involved the random selection of four fishing communities namely Iji, Orugbo, Erepto and Ejirin.
Often referred to as the commercial centre of the country and of West Africa, the state of Lagos is found in south west Nigeria, lying entirely within the rainforest zone of the humid tropics. It has a coastline of 180 km and a small surface area (only 3577 square kilometres), approximately 22 percent of which consists of lagoons, creeks and rivers.
The estimated number of farm families in the state is 350 000, and fishing is the most important occupation of the rural population along the coastline and river courses, ranking next to crop farming in terms of occupation of all rural households in the state. Unfortunately, fish catch is not as high as would be expected, and the amounts of fish caught have been decreasing in recent years.
In 2005, the annual fish catch stood at 18 000 tonnes because fish populations are decreasing. This is not enough to satisfy demand, and around 80 percent of all fish consumed in Lagos is brought in from outside the state.
As less and less fish were being caught, people became more interested in and curious about fish farming. The fising corporative realized that fish farming offers the possibility of increasing fish production, as well as creating employment opportunities, resulting in an additional source of income for urban dwellers. A few years ago, the Authority decided to include fish farm practices in its extension programmes, covering issues such as the preparation of feed rations using locally available feed ingredients, the construction of homestead fish ponds with locally available materials, the integration of commercial fish farming with the urban population’s daily activities, the production of fingerlings or young fish at the farms, as well as marketing issues, record keeping, and the linkage with financial institutions for credit sourcing.
As a result, the number of fish farms increased from 500 in 1997 to over 2000 by 2004, with the total area covered by fish farms increasing from 150 to 330 hectares in the same period. Fish farm production now averages 9500 tonnes per year.
Fish farming has been promoted as a low external input technology benefiting from the availability of natural resources and from the optimal local conditions: a high water table almost everywhere in the state, good soil structure and texture for the construction of fish ponds, and an abundance of kitchen wastes that can easily be converted to fish feed ingredients. In this context, fish farmers need little or nothing from outside their environment to achieve optimal production.
The need to get together
But the growing numbers of fish farmers also brought some problems which had not been seen before. Unlike fishermen, who usually reside in one community along the coast and are culturally webbed together, the farmers who were newly engaged in fish farming have completely different socio-cultural backgrounds (especially in the city), with fish farming being the only thing they share.
Fishermen in a particular community find it easy to bulk purchase inputs, or to form themselves into a co-operative society for easier access to credit and market outlets. This is difficult for fish farmers because they are not congregated in one location. In a similar way, the dissemination of improved practices for fish farming was also problematic for the extension agents as the farmers are scattered all over. The practice of homestead fish ponds within the residential areas by individuals who have other business was also an obstacle for the extension agents, as they had to reach them outside their farms during working hours.
After producing fish for some time, fish farmers in different areas realised the disadvantages of the situation they were in: limited access to extension services, reliance on middlemen for marketing (who would also determine the price of their produce), inputs available only at inflated prices, and no chance to share experiences or ideas with others. This was all reflected in the profit they were making.
By working independently, the cost of producing fish was almost the same as the selling price. In addition, they realised that by not working together, it became virtually impossible for them to be properly represented when this was necessary, for example, in the World Food Day celebrations or in lobbying activities.
Fish Farmers’ Cooperative Association
The problems mentioned above became so obvious that the Lagos State Agricultural Development Authority was requested to facilitate the formation of a fish farmers association in 2004. In addition to the provision of extension services, the Authority then decided to try “connecting” people who did not know each other and who were based quite far from each other. The Lagos State Fish Farmers’ Association started with less than 10 members, all of them convinced that by working together they would have better access to inputs, markets and credit facilities. The Authority provided them with some basic institutional support, like stationery for the records of their meetings, and free publicity of their activities (Osuji, 2008).
By December 2006 there were 2100 members. The growth of the Association has been gradual though steady, with members joining after hearing about the results achieved, mostly in terms of the Association’s links to markets, inputs and credit. It is mainly the existing members who publicise the Association to would-be or intending members. In addition to this, the extension agents of the Lagos State Agricultural Development Authority have also assisted in mobilising members for the Association (Olayide, 1999).
From its inception, the leadership of the Association recognised the importance of meeting regularly to sustain members’ interest, while at the same time they realised that if the financial contributions requested from members were too high, members’ commitment may lessen. Therefore they sought the assistance of the Authority in finding a convenient and centrally located meeting place, which was provided at no cost. The contribution per member per meeting was fixed as low as 100 naira (or less than one US dollar).
In order to ensure that members get adequate information as well as update their knowledge on a regular basis, the Association holds a general meeting every fortnight. The agenda includes training for members by a resource person on any identified or current aqua-cultural problem common to all. For example, members do not want to be limited by live or fresh fish sales, so the Association is training their members in preservation and marketing principles in addition to the production technologies. During the most recent meeting in February 2007, members were taught how to smoke fish in order to increase the shelf life and add value to fresh fish.
These meetings also provide a very good opportunity for government agencies, NGOs, input dealers, credit institutions and other stakeholders, to meet a sizeable number of fish farmers. And apart from organising these meetings, the Association has also set up a series of committees for specific activities. These are democratically elected among qualified members, distributing the roles and responsibilities between those who show commitment (in terms of attendance to meetings and contributions). One of these committees, for example, drafted a constitution, already adopted for use. Non compliance with the provisions in this constitution leads to fines or even to the expulsion of an individual member.
The Association has been able to purchase inputs in bulk, which has greatly reduced production costs. It has also facilitated the standardization of production, a step which is necessary when working to improve marketing. Gradually, the Association is becoming a force to reckon with in the regulation of fish price in the state. Prior to the formation of the Association, the price per kilogram of fish was so unstable that it could drop by 50 percent during the glut. Nowadays it drops less than 10 percent. The main reason for this is that the Association has helped many members reach markets directly, bypassing the middlemen.
ORGANISATION STRUCTURE OF FISH FARMERS COOPERATIVE ASSOCIATION OF LAGOS STATE
ORGANIZATION STRUCTURE

SOURCE: Organization Structure of Fish Farmers Cooperative Association Of Lagos State.

The successful formation of the Association and its continued growth show the clear benefits it brings to the small scale farmers and to all the stakeholders in the local fish farm industry. Recent reports by the Lagos State Ministry of Agriculture and Co-operatives indicate that fish production on farms has doubled in the last 2 years. It is also interesting to see that, because of the information shared, the production cycle in most fish farms has reduced from 8 to 5 months.
Looking into the future, the Association is introducing a joining fee, and is planning to make credit available to members with its accumulated funds. It is also thinking of inviting not only the producers (fish farmers) as members, but also other stakeholders (input dealers, service providers, feed millers, marketing advisors). This may lead to more efficient input and output supply chains, taking everybody’s interests into account.
Within a short time, the Lagos State Fish Farmers’ Association has clearly shown that organising farmers into groups along commodity and related lines is possible with few resources, and that this has the potential for solving many problems faced by farmers.
Cooperative as defined by International Cooperative Alliance is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically–controlled enterprise. Agricultural cooperatives are important in the socioeconomic development of the rural economy. Basically, poverty entails low income, low or no access to production inputs, low productivity, illiteracy and lack of access to information and basic necessities of life. It describes a condition of low income that leads to low saving, resulting in low investment and, as a consequence of that, productivity remains low. Farmers are said to be trapped in this vicious poverty cycle due to their low output, low farm production; their income remains low and they are unable to make the necessary investments in farm expansion. The consequence of this is that they are unable to improve their living standard. To break out of poverty, farmers need strong institutions like cooperatives.
1.3 STATEMENT OF THE PROBLEM
Agribusiness cooperative plays usual socioeconomic roles in the Nigerian economy. Ijere (1998) noted the indispensability of microcredit in the performance of agribusiness cooperatives and have identified it as a major factor that motivates other variables. According to him, it serves as elicit that propels activities, the engine of performance and enable other factors to mobilize their inherent potentials and to advance the objectives of the business in the planned or expected direction.
Microcredit appears to be most important factor in rural agribusiness cooperative organization. It is essential because income and expenditure do not take place simultaneously. However, both government and non-government organization are currently attaching much importance to the group approach in extending microcredit to the agribusiness cooperatives in Nigeria. However, the expectation was that the use of such group and will make microcredit available to rural agribusiness cooperative groups and will either remove or reduce the problems of default or increase performance to the group. This seem not to have yielded the expected results as many agribusiness cooperative organizations seems no to have easy access to the much needed microcredit. Those existing agribusiness cooperative in Lagos state in their current features hold some potential in terms of leveraging enough funds for their credit needs and engendering performance (Bob-Igwe, 2007).
The performance of agribusiness cooperative to a satisfactory and sustainable level has been a challenge to policy maker. Both government and non government policies associated with microcredit and agribusiness cooperative are associated with access to credit and concessionary interest on loan. In spite of all these laudable policies, agribusiness cooperative performance has continually remained poor (Osuji, 2008). Critics have attributed their poor performance to factors hinging on misuse of the funds and inadequate supply (CBN, 2000).
1.4 OBJECTIVES OF THE STUDY
The broad objective of the study was to examine the relative effect of microcredit on the performance of agribusiness cooperatives in Lagos State. The specific objectives include to:
i. Analyze the socioeconomic profile agribusiness cooperatives in the study area ii. Analyze the performance of microcredit on agribusiness cooperatives in the study area iii. Examine the factors influencing microcredit repayment performance among agribusiness cooperatives in the study area. iv. Make recommendations based on the findings

1.5 RESEARCH QUESTIONS
This study will provide answer to the following questions:
i. What are the features of agribusiness cooperative in the study area? ii. What are the problems encountered by agribusiness cooperative in acquiring microcredit? iii. Has microcredit any influence on the performance of Agribusiness cooperative?
1.6 RESEARCH HYPOTHESIS
Ho1- Repayment of microcredit is not positively related to income, technology, duration for loan repayment, age of the cooperative and level of education and not negatively related to interest rate, expenditure and amount borrowed
Ho2- There is no significant different between performing microcredit borrowers and non performing microcredit borrowers.
1.7 SIGNIFICANCE OF THE STUDY
At different points in time, different researchers, authors and academics have carried out works on effect of microcredit and the performance of agribusiness cooperatives, yet the present study will help build up more knowledge and thought on the effect of microcredit on the performance of agribusiness cooperatives in Lagos State particularly and Nigeria in general.
In the face of increasing low productivity among agribusiness cooperatives, unemployment and deprivation currently plaguing the country, the question of how the lunch Nigeria into an agrarian nation becomes more imperative now. The poor performance of microcredit institutions and agribusiness cooperatives in Lagos State necessitated the study so as to help formulate policy measures to reduce the problems of production and improve productivity in the sector. This particularly important given the limited resources endowment of small business enterprises which carries out more than 90% of the nation’s business transactions (Olayide, 1999).

1.8 SCOPE OF THE STUDY
The study provides insight into microcredit, cooperative funding of businesses and small business survival and growth, as well as provides a measure of the effects of microcredit on small business performance and productivity in Nigeria. It covers small businesses that have access to microcredit for a period of at least ten years (2004 – 2014). The study shall involve funding of small business, impact of cooperative society, the relationship between cooperative society and small business growth and expansion.
1.9 JUSTIFICATION OF THE STUDY
Many businesses in Nigeria are in dear need of proper funding. The availability of proper funding is only limited to some few businesses that can meet up with the requirements of commercial banks and financial institutions. This research work will proffer solutions to the problems of poor funding of small businesses in Nigeria. The study will be of benefit to government, owners of small businesses, cooperative societies and the general public.
1.10 DEFINITION OF TERMS
Micro enterprise: Micro- enterprise is the informally organized business activity undertaken by entrepreneurs; excluding crop production by convention, employing less than ten people and having assets less than N5 million excluding land and building.
Small enterprise: Small enterprise is any enterprise that employs between ten (10) to forty-nine (49) people and has asset worth (excluding land and building) between N5 million and N50 million.
Medium enterprise: Medium enterprise is any enterprise that employs between fifty (50) and one hundred and ninety–nine (199) people and has assets worth (excluding land and building) between N50 million and N500 million.
Microfinance Banks: Microfinance Banks are licensed financial institutions meant to serve the un-served, but economically active clients in the rural and peri-urban areas by providing diversified, affordable and dependable financial services to the active poor, in a timely and competitive manner, which would enable them to undertake and develop long-term, sustainable entrepreneurial activities and mobilize savings for intermediation.
Microfinance Institutions: Microfinance Institutions are organizations whose activities consist wholly or in significant part, of the provision of financial services to micro entrepreneurs.
Microfinance: Microfinance denotes the provision of financial services adapted to the needs of low income people such as micro-entrepreneurs, especially the provision of small loans, acceptance of small savings deposits and simple payment services needed by micro-entrepreneurs and other poor people.
Microcredit: Microcredit is commonly defined in terms of loan amount as a percentage of average per capita income. In the context of Nigeria, with a GDP per capita of N42,000 (about $300) in 2003, loans up to N50,000 (around $350) will be regarded as micro loans. GDP per capital (PPP U$) in 2007 was U$1,969.
Microsavings:Microsavings are defined as savings accounts with a balance of less than N8,400 (about $50), that is less than 20% of the average annual income per capital.

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