CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The agricultural sector plays a crucial role in the global economy, particularly in developing countries where small scale farmers rely heavily on their crops for sustenance and income. In this context, risk management strategies become vital for farmers to mitigate the uncertainties associated with agricultural production. However, limited access to financial resources often hinders the adoption of such strategies among small scale farmers. This research aims to investigate the effects of microcredit on the adoption of risk management strategies by small scale maize farmers, with the objective of understanding how microcredit can potentially contribute to improving their resilience and livelihoods.

Maize, also known as corn, is one of the most widely cultivated and consumed crops globally, playing a vital role in the world’s food security and economy. Today, maize farming is a significant contributor to the global food supply, with over 197 million hectares of land dedicated to its cultivation, producing over 1 billion metric tons of maize annually (Ernestein et al, 2021). Not only is maize a crucial food source for humans, but it is also used as livestock feed, biofuel, and in various industrial applications. In addition, maize farming supports the livelihoods of millions of small-scale farmers, particularly in developing countries, where it serves as a vital source of income and employment. Furthermore, maize is an excellent source of carbohydrates, fiber, and essential nutrients, making it an integral part of a healthy diet. As the global population continues to grow, the importance of maize farming will only continue to increase, highlighting the need for sustainable and innovative farming practices to ensure the long-term availability of this vital crop (FAO, 2023).

Cameroon is one of the largest producers of maize in West Africa, with the crop being grown in almost every region of the country, and the North West, Adamawa, South West and West regions being the top producers (MINADER,2016). Maize is not only a food source for local consumption, but it also serves as a significant source of income for many small scale farmers, who rely on the crop to feed their families and sell surplus at market. Moreover, maize is also used as animal feed, contributing to the growth of the livestock sector. The importance of maize farming in Cameroon cannot be overstated, as it provides food security, generates income, and supports the livelihoods of millions of people(Manu et al, 2014). Efforts to improve maize production and productivity, such as through the use of improved seeds and farming techniques, are critical to ensuring the long-term sustainability of agriculture in Cameroon and addressing the country’s development goals.

In the lush hills of Mezam Division, Cameroon, maize farming is a vital livelihood for many small-scale farmers. The region’s fertile soil and favorable climate make it an ideal location for growing maize, a staple crop that is both a source of food and income for local communities. In fact, maize is a key component of the traditional Cameroonian dish, fufu, which is made from fermented corn flour. Through maize farming, the people of Mezam Division are able to maintain a rich cultural heritage and provide a sustainable livelihood for their communities (Manu et al, 2014).

However, maize farming in the Mezam Division, is plagued by numerous agricultural risks that threaten the productivity and profitability of farmers. Climate-related risks, such as droughts, floods, and erratic rainfall patterns, are a major concern, as they can result in crop failure, reduced yields, and lower quality produce. Additionally, pest and disease outbreaks, such as the fall armyworm and maize streak virus, can further exacerbate yield losses and reduce farmers’ incomes. Moreover, market-related risks, including price volatility and lack of access to markets, can make it difficult for farmers to sell their produce at a profitable price. Furthermore, soil degradation and nutrient depletion are common problems, which can be exacerbated by poor farming practices and inadequate soil conservation measures.To mitigate these risks, farmers in the area need access to climate-resilient agricultural practices, such as conservation agriculture and agroforestry, as well as crop insurance schemes and market information systems that can help them make informed decisions about their farming operations (Mbah et al, 2023).

Microcredit, a small-scale financial service, has revolutionized the risk management landscape in maize farming, offering a vital lifeline to smallholder farmers. By providing access to timely and affordable credit, microcredit enables farmers to invest in risk-reducing strategies such as crop insurance, irrigation systems, and drought-tolerant seeds. This, in turn, helps to mitigate the impact of adverse weather conditions, pests, and diseases, which can significantly reduce yields and income. Moreover, microcredit can also facilitate the adoption of climate-resilient agricultural practices, such as conservation agriculture, which can help farmers to build resilience and adapt to changing weather patterns. By empowering smallholder farmers to manage risks more effectively, microcredit can play a critical role in promoting food security, reducing poverty, and promoting sustainable agricultural development in maize farming communities (Wenda et al, 2020).

1.2 Problem Statement:

Small-scale maize farmers in the Mezam division, face numerous risks in their business, from internal risks such as inadequate equipment and technology, inadequate skilled labour and poor management practices, to external risks such as unstable market prices, unpredictable weather patterns and sudden outbreaks of pest and diseases. But overall, the main problem faced by small-scale maize farmers in the Mezam division, is the low adoption rate of risk management strategies by the farmers. This means the farmers fail to employ techniques which can assist them to either avoid their risks or mitigate the risk in case of its occurance (Mbah et al, 2023).

Generally, adopting risk management strategies is a vital tool needed to ensure the success of any business venture. Globally, with the alarming increase in the world’s population including the Mezam division of Cameroon, the importance of adopting risk management strategies for farmers cannot be overstated, as it helps to ensure global food security and a stable and sustainable food supply (ARC, 2012). Risk management strategies also help small scale farmers to better navigate market fluctuations, manage price volatility, and protect their investments to avoid losses. In Addition, risk management strategies help to protect the farmers income, by reducing the financial impact caused by uncertainties in agriculture (Gibson, 2023). And overall, the outcome of these strategies tend to be beneficial to the livelihoods of the farmers and their families, especially in developing countries like Cameroon.

Farmers make decisions every day that affect farming operations. Many of these decisions are not secured by risk management strategies and this is a risk on its own (Kahan, 2008). For instance in 2019, a severe drought hit the Midwest, leaving many corn farmers with withered crops and dwindling profits. One farmer in Michigan-USA, who had not invested in crop insurance or diversification, was forced to take out a high-interest loan to cover the losses, putting his entire farm at risk (Torregrossa, 2019). In another example, a group of dairy farmers in California-USA, failed to anticipate the impact of changing consumer preferences on the demand for their products. As the demand for plant-based milk alternatives skyrocketed, they found themselves with a surplus of milk and a dwindling customer base (Webber, 2023).

In Africa, research has proven that the lack of agricultural strategies in some African nations like Ethiopia, is one major cause of issues like malnutrition, as climate and other agricultural risks factors leads to severe impacts on their productivity, resulting to shortages (FAO, 2024).

Futhermore, in Cameroon, the risk management level is low especially in less developed areas like parts of the Mezam Division. This is because the adoption of risk management strategies requires financial resources, knowledge, and access to appropriate technologies, which will assist the farmers to identify, analyse, prioritise, treat and monitor their possible risks (Kahan, 2008). Small-scale maize farmers in Mezam division often lack these resources, which can hinder their ability to implement effective risk management measures. Farmers’ risk perception and their assessments of risk management strategies, are critical to their adoption willingness, and systemically biased judgments on coping capacity could hamper successful adaptive behavior (Grothmann and Patt 2005).

Here are some potential consequences of a lack of risk management strategies by farmers;

Firstly, it causes financial ruin. Without a plan to mitigate risks, farmers may face significant financial losses due to crop failures or livestock disease, leading to bankruptcy or foreclosure. Futhermore, it results to food Insecurity. Without adequate risk management, farmers may struggle to produce consistent yields, leading to food shortages and insecurity for their communities. Additionally, it causes environmental degradation, Poor risk management can result in unsustainable farming practices, leading to soil erosion, water pollution, and loss of biodiversity. Moreover, it results to reputation damages, a lack of risk management can lead to food safety issues, lawsuits, and damage to the farm’s reputation, making it harder to attract customers and secure financing. Market Volatility. Without a plan to manage market risks, farmers may be caught off guard by sudden changes in market prices, leading to reduced income and profitability. Equally, it affects the opportunity costs. Without a risk management strategy, farmers may miss out on opportunities to diversify their operations, invest in new technologies, or expand their markets. Lastly, it leads to dependence on government subsidies. Farms that fail to manage risks may become reliant on government subsidies, which can be unpredictable and may not be sustainable in the long term (OECD, 2020). By implementing effective risk management strategies, farmers can reduce the likelihood of these consequences and create a more sustainable and resilient farming operation.

Microcredit programs have been promoted as a potential solution to address these challenges by providing farmers with access to credit. Microcredit programs aim to promote economic development by providing small loans to individuals who lack access to traditional financial services. These programs can potentially empower small-scale maize farmers by enabling them to invest in productive inputs, such as improved seeds, fertilizers, and irrigation systems, which can enhance their productivity and income (Wenda et al, 2020). Nevertheless, the impact of microcredit on the adoption of such strategies remains understudied.

Therefore, it is essential to investigate the effects of microcredit on the adoption of risk management strategies by small-scale maize farmers. Understanding this relationship can provide valuable insights into the potential benefits and limitations of microcredit programs in promoting agricultural risk management. By identifying the factors that facilitate or hinder the adoption of risk management strategies among microcredit recipients, policymakers, agricultural development organizations, and financial institutions can design more targeted interventions and support mechanisms to enhance the resilience and productivity of small-scale maize farmers (FAO, 2019).    

1.3 Research Questions

1.3.1. Main Research Questions

What is the effect of microcredit in the adoption of risk management strategiesby small-scale maize farmers in Mezam?

1.3.2. Specific Research questions

1. What is the current relationship between small-scale maize farmers and microcredit within the Mezam division?
2. What are the risk management strategies utilized by maize farmers in Mezam?
3. To what extent does microcredit influence the adoption of risk management strategies in Mezam?
4. How do we improve microcredit so as to facilitate the adoption of risk management strategies by small scale maize farmers in Mezam.

1.4 Objectives of the Study

1.4.1. Main Objectives

1. To assess the effect of microcredit in the adoption of risk management strategiesby small-scale maize farmers in Mezam

1.4.2. Specific Objectives

1. To examine the current relationship between small scale maize farmers and Microcredit in Mezam Division.
2. To identify the risk management strategies utilized by maize farmers in Mezam
3. To evaluate to what extent does microcredit influence the adoption of risk management strategies in Mezam
4. To identify key benefits and challenges faced by small scale farmers, in utilizing microcredit in their risk management processes.