AN INVESTIGATION INTO THE ROLE OF DIGITAL FINANCIAL LITERACY IN FACILITATING CREDIT ACCESS FOR AGRICULTURAL PROCESSORS AND MARKETERS IN OSUN STATE

CHAPTER ONE INTRODUCTION 1.1 Background of the Study The agricultural sector plays an essential role in the economic development of many countries, particularly those with emerging economies. In nations like Nigeria, agriculture is a key driver of employment, food security, and rural development. According to the National Bureau of Statistics (2022), agriculture accounts for over 23% of Nigeria’s Gross Domestic Product (GDP) and directly supports more than 70% of the workforce, especially in rural communities. Despite its importance, many agricultural processors and marketers—who are pivotal in the agricultural value chain—face significant financial constraints that hinder their growth and productivity. A recurring problem for these stakeholders is limited access to funding, which restricts their ability to adopt modern technologies, expand their operations, or respond to market changes (Ojo & Edeh, 2023). Traditionally, many of these actors relied on informal savings and loan mechanisms. While such systems are relatively accessible, they often fall short of meeting the growing financial needs of agricultural businesses. On the other hand, formal financial institutions offer more structured credit services that could potentially meet these demands. However, most agricultural processors and marketers find it difficult to access such services due to a number of reasons, including strict collateral demands, high interest rates, and limited financial literacy, especially in rural areas (Mansor et al., 2022). The rapid rise of digital finance has further complicated this issue. Digital financial literacy refers to the knowledge and ability to effectively use digital platforms for various financial purposes, such as making transactions, saving money, managing credit, and handling payments. As more financial institutions move towards digital service delivery, the capacity to navigate tools like mobile banking apps, online payment platforms, digital wallets, and other financial technologies has become crucial for securing loans (Klapper et al., 2019). Digital finance offers numerous advantages, such as increased convenience, lower transaction costs, and wider financial service access. These tools have the potential to revolutionize how agricultural processors and marketers interact with financial systems, potentially improving their access to credit. However, a major challenge lies in the widespread lack of digital financial literacy among these groups, particularly in rural areas. A report by the Consultative Group to Assist the Poor (CGAP, 2020) highlighted that rural populations, especially those involved in farming and related activities, tend to have lower levels of digital literacy compared to their urban counterparts. This deficiency reduces their ability to utilize digital financial services effectively. Financial inclusion—particularly through digital financial services—is widely recognized as a catalyst for economic growth and poverty alleviation. Formal financial access enables marginalized groups such as agricultural processors and marketers to invest in necessary tools, equipment, and infrastructure needed for business expansion (Iwu & Pooe, 2020). Several countries, including Nigeria, have launched initiatives to increase financial inclusion using digital channels. The Central Bank of Nigeria (CBN), for instance, introduced a Financial Inclusion Strategy in 2012, aiming to reduce financial exclusion from 46.3% in 2010 to 20% by 2020 (CBN, 2012). Although progress has been made, significant digital divides still exist, especially in rural areas with limited internet connectivity and digital infrastructure (Adebayo & Olaniyan, 2021). Despite the potential of digital financial tools, many agricultural processors and marketers struggle to acquire the digital financial skills they need. Contributing factors include low educational attainment, limited access to digital devices such as smartphones, and poor internet penetration in remote locations (Nkhata & Nkhata, 2023). Additionally, a lack of trust in digital platforms and the perceived complexity of digital transactions discourages many from adopting these systems (Mansor et al., 2022). Research by Iwu and Pooe (2020) found that many smallholder farmers and traders in South Africa still prefer traditional banking methods, even though digital alternatives exist. The study underscores the need for targeted financial education programs that address the specific challenges and needs of rural agricultural stakeholders. Similarly, in Nigeria, efforts to boost digital literacy are often hindered by socio-economic issues like poverty and gender inequality. These barriers disproportionately affect women, who play vital roles in agricultural processing and marketing (Ojo & Edeh, 2023). Both government bodies and financial institutions have key roles to play in bridging the digital financial literacy gap. Governments can support this by investing in rural education and digital infrastructure, while financial institutions can offer tailored digital literacy training to their customers. In Kenya, the M-Pesa mobile money service significantly improved financial inclusion by providing an easy-to-use digital platform alongside wide-reaching financial literacy campaigns (Jack & Suri, 2011). A similar model could be adapted to the Nigerian context to raise digital financial literacy levels among agricultural processors and marketers. Nigeria has launched several digital initiatives to improve financial access, such as the Nigeria Interbank Settlement System (NIBSS) and the expansion of mobile banking platforms. While these developments offer agricultural stakeholders improved access to financial services, many are still unable to fully benefit due to their lack of digital literacy (Adebayo & Olaniyan, 2021). Consequently, this study aims to explore the relationship between digital financial literacy and access to credit among agricultural processors and marketers in Osun State. 1.2 Statement of the Problem The availability of credit is a critical factor in the growth and sustainability of agricultural processors and marketers. Yet, many individuals in the agricultural sector continue to face serious barriers in securing financial resources, primarily due to limited financial literacy. In today's digitally driven economy, digital financial literacy—meaning the ability to effectively use digital platforms for managing financial transactions—has become increasingly essential. A lack of understanding of digital financial tools often leads to poor financial decisions and restricted access to credit opportunities (Adebayo & Olaniyan, 2021). Evidence suggests that insufficient digital financial knowledge impairs agricultural stakeholders’ ability to utilize available loan facilities, resulting in missed opportunities for business growth (Mansor et al., 2022). Furthermore, many financial institutions now prioritize clients who are digitally literate, inadvertently excluding those who lack the necessary skills to engage with digital financial systems (Nkhata & Nkhata, 2023). This situation creates a divide between those who can access credit and those who cannot, affecting the productivity and financial well-being of agricultural processors and marketers (Iwu & Pooe, 2020). As such, this study investigates digital financial literacy and its influence on access to credit among agricultural processors and marketers in Osun State. 1.3 Objective of the Study The main objective of this research is to examine the relationship between digital financial literacy and access to credit among agricultural processors and marketers in Osun State. The specific objectives are: i. To assess the current level of digital financial literacy among agricultural processors and marketers in Ogun State. ii. To evaluate how frequently and effectively agricultural processors and marketers use digital financial platforms to access credit in Ogun State. iii. To examine the role digital financial literacy plays in enhancing financial decision-making among agricultural processors and marketers in Ogun State. iv. To identify the main barriers to acquiring digital financial literacy among these stakeholders in Ogun State. 1.4 Research Questions The following research questions guide the study: i. What is the level of digital financial literacy among agricultural processors and marketers in Ogun State? ii. To what extent do agricultural processors and marketers in Ogun State use digital financial platforms to access credit? iii. How does digital financial literacy influence the financial decision-making of agricultural processors and marketers in Ogun State? iv. What are the major challenges faced by agricultural processors and marketers in acquiring digital financial literacy in Ogun State? 1.5 Significance of the Study This research holds importance for various groups: Agricultural Marketers and Processors: The study will demonstrate the value of digital financial literacy in securing credit, helping stakeholders better understand how digital tools can improve financial management and loan accessibility. By identifying the obstacles to digital literacy, the findings can offer practical suggestions to support better financial decision-making and business growth. Academic Community: The study will contribute to existing scholarly work by enriching the literature on financial literacy, digital finance, and agricultural development. 1.6 Scope of the Study This study focuses on examining digital financial literacy and its impact on access to credit among agricultural processors and marketers in Ogun State. Specifically, it investigates: The current level of digital financial literacy within this group; How often and effectively they use digital platforms for credit access; The role digital literacy plays in their financial decision-making; The challenges they face in acquiring digital financial knowledge. Geographically, the study is delimited to Osun State. 1.7 Limitations of the Study As with most research efforts, a few limitations were encountered: Time Constraint: Balancing academic commitments such as lectures and coursework with the demands of the research project was challenging for the researcher. Financial Constraints: The researcher incurred additional costs for tasks such as printing, typing, and sourcing materials and data. Availability of Materials: Due to the relatively limited literature on the topic, finding relevant and updated information proved to be a challenge. 1.8 Definition of Terms Digital Financial Literacy: The knowledge and ability to effectively use digital tools for financial activities including payments, savings, loans, and investments. Agricultural Processors: Individuals or entities that convert raw agricultural produce into processed or semi-processed goods. Agricultural Marketers: Stakeholders involved in promoting and selling agricultural products to consumers or businesses. Access to Credit: The opportunity for individuals or businesses to secure financial support, especially loans, to fund operations or expansion. Financial Inclusion: The ability of people, especially in underserved areas, to access and use formal financial services such as savings accounts, credit, and insurance. Barriers to Digital Financial Literacy: Factors such as poor education, lack of digital devices, or distrust in digital systems that prevent individuals from learning or using digital financial tools. Formal Financial Institutions: Registered entities like banks and microfinance institutions that provide regulated financial services to individuals and businesses.