7 Simple Ways Of Generating Capital For Agricultural Investment

Farmers especially (peasant farmers) cannot generate enough capital from their savings to finance their farm business therefore there is need to source for fund/capital

SOURCES OF FARM FINANCING.
WAYS OF GENERATING CAPITAL FOR AGRICULTURAL  INVESTMENT

Capital or money can be secured for agricultural investment in two ways:

1.   External Generation of Capital: This is a situation whereby capital is generated for agricultural investment from outside (not from the farmer’s account).

2.   Borrowing: This means taking money on loan with the understanding that it will be returned as agreed upon at an appointed time.
       Money/capital could be from any of these agencies.

i.             Co-operative society

ii.           Commercial banks e.g. First bank of Nigeria, Union Bank, StanbicIBTC Bank, GT bank, Polaris bank, Zenith Bank, Kuda Bank e.t.c

iii.          Agricultural banks e.g. National Agricultural  and Rural Development Bank

iv.          Micro-finance banks and Institutes e.g. Nirsal MFB, SEAP Microfinance, http://nmfb.com.ng/ LAPO and other microfinance or micro credit lenders, All ht e above have longer history of operations, all registered, but understand their better concepts  too.

v.           Reasonable Money Lenders

vi.          Friends and relatives

vii.      Government approved agencies such as National directorate of employment (NDE, SMEDAN) Fadama project, rice project etc.

      Internal generation of capital:This is a situation whereby the farmer generates the fund or money to finance his agricultural business without going outside to borrow. 
      Money can be secured internally by:
  i. Personal savings.
 ii. Sales of farmer/farm’s asset.
 iii. Gifts.

Land Tenure System In Agriculture

Land tenure system can be defined as the system of land ownership or condition under which land is held by an individual, a community or a group of people.

Types of Land Tenure System

1. Gift: This is a system of land ownership whereby a piece of land is given to an individual or a group of people out of goodwill and free of charge without paying money.

This can be in appreciation of what the person has done or as incentive.

Advantages

1.       Any type of crop can be planted on it

2.       It can be used as collateral to obtain bank loan

Disadvantages

1.   Land size might be small

2.   It encourage land fragmentation



2.  Communal ownership: This is a system of land ownership where the community has right of ownership over a land. Every member of the community is entitled to use the land but on request and approval.

Advantages

1.   Community members have free access to the land

2.   Community norms regulates access to the land

3.   It is cheap to obtain

Disadvantages

1.   Non indigenes are not entitled to such land

2.   Allocated land can be revoked by a new leader

3.   Activities of the land users can be restricted

3.   Ownership by Purchase:  This is a system of land ownership where by a person pays a certain sum of money for the purchase/acquisition of a piece of land.

After payment, the person (purchaser) becomes the real and total owner of the land

Advantages

1.   Owner can plant any type of crop that he desires

2.   It reduces or eliminate disputes

3.   The land can be used as collateral to obtain bank loan


Disadvantages

1.   It is usually expensive.




2.   There is possibility of falling into the hands of illegal sales agent

3.   It encourages land fragmentation

4.   Ownership by Inheritance:  This is a system of land ownership whereby an individual  inherits  a piece of land from his/her parents

Advantages

1.   It is free of charge

2.   Permanent crop can be cultivated on the land

3.   It can be used as collateral to obtain bank loan


4.   Only legitimate children can have access to such land

Disadvantages

1.   Sharing of land can generate dispute in the family

2.   Women are not listed as beneficiaries

3.   The land is controlled by the head of the family

4.   It leads to land fragmentation.






5.   Land Tenure by Lease (lease hold):  This is a system of land ownership whereby an individual becomes the owner of a piece of land by paying certain amount of money for a fixed period of time.

Advantages

1.   This land can be effectively controlled by the owner

2.   The agreement can be renewed

Disadvantage

1.   Such land cannot be used as collateral to obtain loan from bank

2.   Development of land is not encouraged

6.   Ownership by Rent:  This is a system of land ownership whereby the land is used for a  period of time on rentage   


LAND USE ACT/DECREE OF 1978

AIMS OF LAND USE ACT

1.   To reduce dispute generated from land ownership system

2.   To streamline and simplify the ownership and management of land in the country

3.   To make more land available for large scale agricultural production

4.   To ensure proper use of the land for agricultural purposes and non-agricultural purposes

5.   To ensure freedom of farming in cases where there are tradition beliefs or regulations against such freedoms.

6.   It influence the size of land holding or available for agriculture i.e., it prevents land fragmentation and encourages large scale farming


The land use act/decree of 1978 states that:-

1.   All land in Nigeria belongs to the Federal Government of Nigeria.

2.   The right to allocate land and issue certificate of occupancy is vested in the state governors

3.   Only a Nigerian of 21 years have right to acquire land