Interest rates: Interest rate is the rate at which farmers can borrow money from bank i.e. the amount of interest a farmer will have to pay on the money borrowed.
High interest rate discourages borrowing while low interest rate encourages borrowing. Therefore, farmers cannot borrow when the interest rate is too high
Collateral security: This is what the banks and other financial institutions will want a borrower to present before a loan can be given.
Such securities include landed property, buildings etc. most farmers do not have these securities and therefore, cannot borrow money.
Banks, therefore, find it very difficult to grant loan to farmers engaged in the cultivation of such crops
Unpredictable climate which can lead to crop failure:
Agricultural activities in Nigeria depend naturally on rainfall. A good rainfall encourages productivity but lack or rainfall is a doom to farming activities.
Banks, therefore, are always afraid to lend money to farmers because unfavorable climate can lead to crop failure
Lack of farm records: Farmers lack good farm records of all their activities which can be used to assess their credit worthiness
High level of loan defaulters: Farmers may not be able to repay the principal, let alone the interest charged, in case of natural disaster.
Lack of insurance policy: Farmers do not take insurance policy on their farms
Lack of moratorium: Banks do not give moratorium or deferment of payment of loans to farmers
Land tenure system: The prevalent land tenure system works against procurement of agricultural loans
Small farm holdings: Farm holdings are too small and uneconomical to operate for mechanization and profit
Lack of awareness: As a result of high level of illiteracy among farmers, they are hardly aware of the existence of loan facilities in banks.
Bureaucracy: bureaucracy (redtapism) which is normally involved in the procurement of loan does lead to non-disbursement of loans to farmers.