Abstract
This study focused on determinants of formal credit demanded among small-scale rice processors in Bauchi and Gombe states, Nigeria. Specifically, the objectives were to determine the formal credit sources, purpose of credit, and interest rate among beneficiaries, and evaluate the factors influencing the demand for formal credit among small-scale rice processors. A multi-stage sampling technique was used to select 322 rice processors who are beneficiaries of formal credit and 316 rice processor who are non-beneficiaries. Primary data of cross-sectional sources were used based on a well-structured questionnaire. Data were analyzed using descriptive statistics, demand model, and ordinary least squares (OLS) regression model. The result revealed that the microfinance institutions and cooperative societies were the primary sources of formal credit used mainly for business expansion and working capital at an average annual interest rate of 21.36%. The regression analysis shows that the amount of credit received, income from non-processing activities, and marital status were significant factors influencing the credit demand across both states at (p < 0.01). In the pooled model, additional factors such as gender, distance to financial institutions, and the income from processing activities were significant determinants. The t-test results further confirmed significant differences in credit demand based on processing experience and income levels, suggesting that while formal credit is accessible through specialized institutions, demand is heavily moderated by the processors’ existing financial capacity and demographic profiles. The study recommended that policies should be formulated to support capacity‑building programs in financial literacy and bookkeeping, enabling processors to sustain repayment.
Keywords: formal credit, rice processors, small-scale, ordinary least squares regression, demand model