The effectiveness of interest-free loans as startup capital: Empirical evidence from poultry farmers in Tubah Sub-Division, North West Region, Cameroon
Paper Details
The effectiveness of interest-free loans as startup capital: Empirical evidence from poultry farmers in Tubah Sub-Division, North West Region, Cameroon
Abstract
Loans are an important financial service, especially when savings are challenging due to low income among farmers. Limited access to loans can hinder farmers from acquiring necessary tools and skills to boost production. This study examines the effectiveness of interest-free loans in generating startup capital for poultry farmers in Tubah Sub-division. This research used purposive sampling to select poultry farmers in Tubah Sub-division who had received interest-free loans to invest in poultry farming. With the help of quarter heads, 80 poultry farmers were identified, and a sample size of 52 was calculated using Fisher’s formula. Multiple linear regressions (OLS technique) analyzed the relationship between interest-free loans and farmers’ startup capital. Results reveal that interest-free loans significantly influence startup capital for poultry farmers in Tubah Sub-division, accounting for 89% of startup capital. The findings suggest interest-free loans are an efficient means of obtaining startup capital, highlighting the need for more financial institutions adopting interest-free policies. Results also reveals an adjusted R-Square of 0.5388, indicating 54% of startup capital changes were due to interest-free loans. The F-value (4.02) shows farmers’ ability to obtain interest-free loans significantly influences socioeconomic factors. Government should establish more financial institutions adopting interest-free policies with lower indices than interest-based policies, and fix poultry item prices (like feed) to support farmers, as high feed costs drive up production costs.
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