Abstract
The study investigated the challenges and prospects of commercial bank loan extended to farmers in Lagelu Local Government of Oyo state, Nigeria. The methods used include descriptive statistics, binomial logistic regression analysis with multinomial logit regression. The result of the binomial logistic regression revealed that the variables that determine farm output are age, household size, hired labour, marital status, number of loan applications, amount of loan collected, off-farm income and interest rate on loan. Also, the multinomial logit regression analysis revealed that the variables that determine cassava crop production are hired labour, number of loan application and amount of loan collected, amount of loan collect and off-farm income determine rice production in the study area, interest rate on loan was the only variable that determine potatoes production, household size, and farming experience are the only variables that determine the production of maize in the study area, while farm size determine the output of groundnut production in the study area. The study recommended that since loan is one of the avenues that farmers can increase their farming output which will product the growth of gross domestic product, government agency should instruct commercial banks to direct more loans to agricultural activities. Farmers should not give up in applying for loan because at the end of the day, they will be surely granted and interest rate on loans given to farmers by commercial banks should be lower in other to encourage them to borrow more.