Effect of Microcredit on Welfare of Rural Households in Oyo State, Nigeria

The impact of microcredit on the livelihoods of poor rural households and its contribution to the socioeconomic development of the poor cannot be underestimated. This study investigated the effect of microcredit on rural households irrespective of the enterprises engaged. Primary data was collected through semi-structured questionnaires. A total of one hundred and fifty rural household heads were interviewed using a multi-stage sampling technique to select the respondents and only 134 (89.33%) questionnaires were used for the analysis. The data collected were analyzed using descriptive statistics, Mean Per Capita Household Expenditure (MPCHE), and ordered logistic regression models. The results of findings showed that 57.46% of the respondents were males, 82.84% were married and 67.91% were literate. The mean of age, household size, and years of formal education were 38.9years, 6.22, and 9.59years respectively. The findings further revealed that household size (Pα0.5), years of formal education (Pα0.1), years of experience (Pα0.1), the interest charged on the credit (Pα0.0a 5), the time lag of credit delivery (Pα0.05), payback period (Pα0.01), and distance to credit source (Pα0.1) were significant to microcredit access in the study area. The ordered logit result revealed that distance to credit source and household total expenditure were significant to welfare level at Pα0.1 and Pα0.01 respectively however, household size and amount borrowed are negatively correlated to welfare level and significant at Pα0.01 and Pα0.1 respectively. The Mean Per Capita Household Expenditure (MPCHE) was N7064.14 with a welfare line of N709.36 and the welfare categories are low (18.66%), average (41.04%), and high (40.30%). It is therefore recommended that the payback period should be extended to allow ease of repayment with low-interest rates and the means of accessing credit should be improved so that more households could benefit. Also, the government should intensify efforts toward education beyond the primary level among rural households.