INCOME, SAVINGS AND INVESTMENT PATTERNS OF SMALL-SCALE AGRO-BASED ENTREPRENEURS IN ANAMBRA STATE, NIGERIA ABSTRACT: The study examined income, savings and investment patterns of small-scale agro-based entrepreneurs in Anambra State. The study utilized primary data to achieve this objective. The data were collected through multi-stage random sampling technique from 160 respondents. These data were analyzed with descriptive statistics including 4-point Likert rating scale, and multiple regressions. Tests of significant effects and differences were carried out with t-test and analysis of variance (ANOVA) techniques. Research results indicated that the average age of the small-scale agro-based entrepreneurs were 40years, while majority (33.8%) of them fell within the age range of 31-40 years. Also, majority (57.5%) of the small-scale agro-based entrepreneurs were males, while 43.8% of them were married. Household size of six to ten persons was the highest at 41.3% with an average of 9 persons per household, while twenty five percent of the agro-based entrepreneurs had completed their primary school education. Furthermore, majority (26.9%) of the entrepreneurs were engaged in groundnut processing, while the average experience of the entrepreneurs was 9 years and majority (38.1%) of them had 6 – 10 years of experience. Further results showed that the average monthly income of the small-scale agro-based entrepreneurs was N12,031.25 while their average monthly savings was N4,550.00. Majority (58.3%) of the small-scale agro-based entrepreneurs saved with esusu. Further results showed that majority (46.3%) of the entrepreneurs invested within N21,000 - N30,000 in their businesses while 46.3% of them also sourced their investment capital through personal savings with only 2.5% of them receiving loans from bank to finance their investments. There were no significant (p>0.1) differences in investment pattern of the agro-based entrepreneurs across the agricultural zones. Furthermore, the results showed that the socio-economic characteristics were significant (p<0.1) in explaining the changes in income, savings and investment patterns of the agro-based entrepreneurs. Age, educational level, savings level, asset level and level of skill acquired were positive and significant (p<0.05) in affecting the income pattern of the agro-based entrepreneurs. Also, the savings level of the entrepreneurs were positively and significantly (p<0.01) affected by their income and asset levels, and level of skill acquired, while the effects of household size and educational level were negative and significant (p<0.05). Furthermore, educational level, level of skill acquired, savings level and amount of money borrowed by the entrepreneurs had positive and significant (p<0.05) relationship with their investment pattern while the effects of household size and amount of interest paid on borrowed money were negative and significant (p<0.05). Further results showed that the challenges facing small-scale agro-industry were at an average of 2.85 on a 4-point Likert rating scale. These challenges included erratic power supply, lack of accessibility to their business areas, multiple government taxation and low patronage. The study recommended policies that will enhance the income, savings and investment levels of small-scale agro-based entrepreneurs in Anambra State. TABLE OF CONTENTSTitle Page iCertification iiDedication iiiAcknowledgement ivAbstract vTable of Contents viList of Tables xList of Figures xiChapter One: Introduction1.1 Background of the Study 11.2 Problem Statement 41.3 Objectives of the Study 61.4 Hypotheses of the Study 71.5 Justification of the Study 7 Chapter Two: Review of Related Literature2.1 Concept of Small-Scale Agro Based Entrepreneurs 92.1.1 Meaning of Small Scale Industries/Enterprises 11 2.1.2 Roles of Small-Scale Agro-Based Entrepreneurs in Economic Development 122.2 Socio-Economic Characteristics of Small-Scale Agro-Based Entrepreneurs 13 2.2.1 Gender of Small-Scale Agro-Based Entrepreneurs 142.2.2 Age of Small-Scale Agro-Based Entrepreneurs 14 2.2.3 Education Level of Small-Scale Agro-Based Entrepreneurs 142.2.4 Marital Status of Small-Scale Agro-Based Entrepreneurs 152.2.5 Occupational Categories of Small-Scale Agro-Based Entrepreneurs 15 2.2.5 Income Level of Small-Scale Agro-Based Entrepreneurs 16 2.3 Sources of Capital/Funds for Investment by Small-Scale Agro-Based Entrepreneurs 16 2.4 Patterns of Investment and Savings of Small-Scale Agro-Based Entrepreneurs18 2.4.1 Patterns of Investment of Small-Scale Agro-Based Entrepreneurs 18 2.4.2 Patterns of Savings of Small-Scale Agro-Based Entrepreneurs 192.5 Factors Affecting Income, Savings and Investment Patterns of Agro-Based Entrepreneurs 20 2.6 Factors Affecting the Income of Small-Scale Agro-Based Industry 22 2.7 Theoretical Framework 272.7.1 Life Cycle Hypothesis 272.7.2 Permanent Income Hypothesis 282.7.3 Keynesian and Accelerator Theories 302.8 Analytical Framework 302.8.1 Likert Scale 312.8.2 Multiple Regression 312.8.3 Analysis of Variance (ANOVA) 322.8.4 T- Test 32Chapter Three: Research Methodology3.1 Area of Study 333.2 Sampling Technique 343.3 Data Collection 343.4 Analytical Technique 35Chapter Four: Results and Discussions4.1 Socio-Economic Characteristics of Small Scale Agro Based Entrepreneurs 394.1.1 Age of Small-Scale Agro-Based Entrepreneurs 394.1.2 Sex of Small-Scale Agro-Based Entrepreneurs 404.1.3 Marital Status of Small-Scale Agro-Based Entrepreneurs 404.1.4 Household Size of Small-Scale Agro-Based Entrepreneurs 414.1.5 Educational Level of Small-Scale Agro-Based Entrepreneurs 424.1.6 Type of Agro-Based Activity Engaged by Small-Scale Agro-Based Entrepreneurs 434.1.7 Nature of Business of Small-Scale Agro-Based Entrepreneurs 444.1.8 Years of Experience of Small-Scale Agro-Based Entrepreneurs 444.1.9 Possession of Requisite Skills by Small-Scale Agro-Based Entrepreneurs 45 4.2 Income and Savings Status and Patterns of Small-Scale Agro-Based Entrepreneurs 46 4.2.1 Income Status of Agro Based Entrepreneurs 464.2.2 Income Sources of Small-Scale Agro-Based Entrepreneurs 474.2.3 Savings Status of Small-Scale Agro-Based Entrepreneurs 484.2.4 Savings Patterns of Small-Scale Agro-Based Entrepreneurs 494.3 Investment Patterns of Small-Scale Agro-Based Entrepreneurs 504.4 Sources of Capital for Investment by Small-Scale Agro-Based entrepreneurs514.4.1 Sources of Capital 514.5 Factors Affecting Income, Savings and Investment Patterns of Small-Scale Agro-Based Entrepreneurs in Anambra State 524.5.1 Factors Affecting Income Pattern of Small-Scale Agro-Based Entrepreneurs524.5.2 Factors Affecting Savings Pattern of Small-Scale Agro-Based Entrepreneurs544.5.3 Factors Affecting Investment Pattern of Small-Scale Agro-Based Entrepreneurs55 4.6 Factors Affecting the Income of Small-Scale Agro-Based Industry 57Chapter Five: Summary, Conclusion and Recommendations 5.1 Summary 605.2 Conclusion 625.3 Recommendations 63References 65 Appendices 72 LIST OF TABLES1: Age distribution of small-scale agro-based entrepreneurs in Anambra State 392: Distribution of small-scale Agro-based Entrepreneurs according to marital status413: Frequency distribution of small-scale agro-based entrepreneurs according to Household size 414: Frequency distribution of small-scale agro-based entrepreneurs according to level of education 425: Frequency distribution of small-scale entrepreneurs according to their type of agro-based activities 436: Frequency distribution of small-scale agro-based entrepreneurs according to their level of experience 457: Frequency distribution of small-scale agro-based entrepreneurs according to 8: Distribution of small-scale agro-based entrepreneurs according to their sources of income 489: Frequency distribution of small-scale agro-based entrepreneurs according to their monthly savings 4810: Pattern of Investment of agro-based entrepreneurs 5111: Regression result on the factors affecting the income of small-scale agro-based entrepreneurs 5312: Regression result on the factors affecting the savings of small-scaleagro-based entrepreneurs 5513: Regression result on the factors affecting the investment pattern of small-scaleagro-based entrepreneurs 5714: Likert rating scale of factors affecting income of small-scale agro-based industry 58 CHAPTER ONEINTRODUCTION1.1 Background of the StudyThe role of agriculture and agro-based industries in Nigeria cannot be over emphasized. Agriculture is a source of food for consumption by man, feeds for animals and raw material for the agro-based industries (Edoumiekumo&Audu, 2009). Agriculture contributes to the growth of the economy and also provides employment opportunities for the teeming population and eradicates poverty in the economy, serves as means of income and livelihood, helps in wealth creation and generation of foreign exchange earnings for the country (Nigerian Investment Promotion Commission, 2004). This dominance of agriculture places great premium on the activities of agro-based industries and entrepreneurs in the growth and development of such economies. According to KarandMishra (2004), agro-based enterprises are involved in the production, processing, preservation, manufacturing of agricultural inputs and marketing of agricultural products,and the individuals involved in these activities are the entrepreneurs. An entrepreneur, according to Amuseghan (2008), recognizes opportunities and utilizes them. The entrepreneur starts a business, arranges business ideas and takes risks in order to make profit.In Nigeria, just like other developing economies the activities of agro-based entrepreneurs are on small-scale bases not exceeding annual turnover of N500,000 (CBN, 2005). Onyebinama (2004) reported that agriculture and agro-based activities in Nigeria are largely on small-scale involving land holding between one (1) and five (5) hectares. In this context therefore, small-scale agro-based entrepreneurs refers to entrepreneurs that are involved in the processing of agricultural products and whose annual turnover are less than N500, 000. As such, this study will concentrate on entrepreneurs that are involved in the processing of agricultural products on small-scale level. Therefore, entrepreneurs involved in the processing of agricultural products add value to them by elongating their shelf life, reducing their bulkiness and creating different varieties and forms. Such agricultural products include cassava, palm nuts, palm kernel, groundnut, plantain, rice, soybean and maize. This has become very imperative in view of the high post-harvest losses associated with agricultural products due to their ease of perishability (Mehta, 2012). Income, savings and investment are very important parameters that define the wellbeing and performance of small-scale agro-based entrepreneurs. This is because Nigeria, like other developing economiesfaces the herculean task of finding sufficient capital to pursue her developmental efforts (CBN, 2005). As such, the activities of the dominant sector in the economy (i.e. small-scale agro-based entrepreneurs) are affected by their income, savings and investment patterns. Several surveys have shown that Nigerians are trapped in the vicious circle of poverty−low income, low savings and low investments (Obayelu, 2012). The country, therefore, needs very high rates of savings and investments to make a leap forward in her efforts of attaining high levels of growth (CBN, 2005). Successive administrations in the country have placed emphasis on savings and capital formation as the primary instruments of economic growth in order to increase national income (CBN, 2005).In other words, capital formation plays a vital role in continuous increased production of goods and services, and as such, capital formation has to be supported by appropriate volume of savings. A growth in economic activities stimulates investment, and increased investment in turn enhances economic growth, income and savings levels (Mishra, Das & Mishra, 2010). As noted by Obayelu (2012), increase in savings, use of increased savings for increased capital formation, use of increased capital formation for increased savings for a further increase in capital formation constituted the strategy behind economic growth. This process of increased capital formation leading to increased savings and increased savings leading to increased capital formation will continue till savings, capital formation and income reach desired levels after which savings and capital formation gets stabilized and there would be a steady and self-sustaining increase in national income (Obayelu, 2012).According to The Macmillan English dictionary (2007), income refers to money that someone gets from working or from investing money. The investment of money is the pre-occupation of entrepreneurs. In the view of Keynes (1936) the income of the agro-based entrepreneurs is the excess of the value of entrepreneurs’ finished output over his prime cost.In other words, it is taken as being equal to the quantity of the output, depending on his scale of production which he endeavors to maximize.The level of income of small-scale agro-based entrepreneurs is central to their savings and investment patterns as almost all models of economic development incorporate a critical role for savings and capital formulation (Morokolo, 2001). Morokolo (2001) reported the view of Gersovitz (1995) that several theorists of the low-level-equilibrium trap adopt the simplification that all income is consumed until a critical level is reached, while a fixed proportion of income above this level is saved. The level of income of the small-scale agro-based entrepreneurs depends upon certain independent factors like family size, number of earners, age, educational level, asset level, savings and investment (Adetunji, 2002). Yusuf and Peters (1984) had argued that Keynesian economists regard the level of current income as the very first rung in a theory of savings. How much an individual, a family, a region and a nation might save depends, quite appropriately on total earnings.Savings according to Amu and Amu (2012) refers to an amount of money put aside for future use. It is the sacrifice of current consumption to allow for capital accumulation, and is very imperative for supporting and developing rural industries (Obayelu, 2012). Savings provide numerous benefits to small-scale agro-based entrepreneurs directly for investment and indirectly as indication for repayment ability, increase in credit rating and as collateral in a credit market (Brata, 1999). Investment on its part is the process of injecting capital into a business with the view to generate further capital (Arene, 2008). It leads to increased production which later enhances more consumption and income. The income-expenditure model holds that it is at the point where investment equals savings that the economy attains equilibrium. Adam and Agba (2006) view savings as an important macroeconomic variable that impact significantly on the rate of capital accumulation, productivity, and the independence of a nation in terms of capital and ownership of domestic assets. Alade (2006) succinctly hints that a farmer who consumes the seedlings meant for the next planting season does not expect any harvest. It follows therefore, that high level of domestic savings will facilitate investment, increase productivity and finally growth in the economy.1.2 Problem Statement The rate of economic growth and development in developing economies like Nigeria is driven mainly by the activities of small-scale entrepreneurs (CBN, 2005). For economies like that of Nigeria that is primarily agrarian, small-scale agro-based entrepreneurs become the active drivers. The performance and productivity of these small-scale agro-based entrepreneurs are affected by their level of income, savings and investment(Obayelu, 2012). The trio of income, savings and investment are so webbed together that they are causes and effects of one another. Akingunola (2011) reported that a business with low level of investment will yield low income for the entrepreneur and this low income will further result to low savings. Furthermore, the income level of an entrepreneur will determine the level of his investment. In other words, an entrepreneur with low income level has low investment and savings levels.Some studies have been carried out on either the income, savings or investment levels of small-scale agro-based entrepreneurs. Olashore (1998), Yusuf (2000) and Obayelu (2012) reported that small-scale agro-based entrepreneurs are characterized by low income, poor access to credit, poor saving rate, risk and uncertainty, poor weather condition, and low level of investment. Also, Albu and Scott (2001) reported that the inability of agro-based entrepreneurs to access credit facilities has restricted their potential to expand their enterprises and as such end up with low income, poor savings and low investment. However, most of these studies did not examine the trio (income, savings and investment) together in order to identify their levels, patterns and inter-relationship. This has created a gap in literature especially in Anambra state that is highly reputed for commerce and industry. Furthermore, earlier studies have shown that small-scale agro-based industry is faced by a mirage of problems which undermine their productivity (Shehrawat, 2006; Edoumiekumo & Audu, 2009; Ayozie, 2011; Mehta, 2012). Such problems identified include lack of power supply, lack of accessibility to their business areas, low technical know-how, low patronage, poor educational background and multiple taxation by government. Others are irregularity in the supplyof agricultural inputs, inadequate procurement of raw materials, lack of portable water supply, lack of access to land and the challenge of environmental degradation. However, these problems vary from one agro-based firm to another, and also, from one location to another. Empirical studies have not been sufficiently conducted to localize these problems particularly in Anambra state as a prima facie to addressing them. These result to low level of investment, low income and savings levels, and a vicious cycle of poverty that has encapsulated the Nigerian economy. This has created the following research questions which this study will aim at providing answers to:i. what are the socio-economic characteristics of small-scale agro-based entrepreneurs?ii. what are their levels of income, savings and investment?iii. what are their sources of capital for investment?iv. what factors influence their income, savings and investment levels?v. what factors affect the income of small-scale agro-based industries?1.3 Objectives of the StudyThe broad objective of this study was to examine the income, savings and investment patterns of small-scale agro-based entrepreneurs in Anambra State.The specific objectives are to:i. describe the socio-economic characteristics of small-scale agro-based entrepreneurs;ii. determine the income and savings statusof small-scale agro-based entrepreneurs;iii. analyze the investment pattern of small-scale agro-based entrepreneurs;iv. analyze the sources of capital for investment by small-scale agro-based entrepreneurs;v. ascertain the factors that affect the income, savings and investment patterns of small-scale agro-based entrepreneurs;vi. identify the factors that affect the income of small-scale agro-based industry;1.4 Hypotheses of the StudyThe following null hypotheses were tested:i. H01:socio-economic factors do not affect the income, savings and investment patterns of small-scale agro-based entrepreneurs; ii. H02: there is no significant difference in the pattern of investment among the agricultural zones in the state. 1.5 Justification of the StudyThe economy of Nigeria remains undeveloped and is driven mainly by economic activities of small-scale agro-based entrepreneurs with low income, savings and investment portfolios. As important as these things are to the growth of the Nigerian economy, the income, savings and investment patterns of agro-based entrepreneurs have not been adequately studied to determine their peculiarities and characteristics. Shitu (2012) reported that increased income, savings and investment patterns have become vital means by which human race can be sustained for a viable development in Nigeria. However, few studies have examined the relationships between small-scale agro-based entrepreneurs and each of income, savings and investment, but none of these studies have been able to look at all these variables together (Adeyemo&Bamire, 2005; Obayelu, 2012; Mkpado&Arene, 2010). This is very important, bearing in mind that these variables are so interrelated and interwoven that they cannot be treated in isolation. In addition, these studies have not been able to capture every relevant information concerning the income, savings and investment patterns of agro-based entrepreneurs either individually or collectively across the country and particularly, in Anambra State.This study therefore will provide empirical parameters on the income, savings and investment patterns of small-scale agro-based entrepreneurs.It will also provide useful information on other factors that are affecting the productivity of small-scale agro-based entrepreneurs besides income, savings and investment levels. Results of the study will provide a base for formulating policies that will benefit not only the agro-based entrepreneurs but also entrepreneurs as a whole and the country at large. Students and researchers will find the results very informative and good source of literature materials. In the final analysis, the implementation of the recommendations based on the findings of this work will lead to a robust rural economy, improved productivity and poverty reduction. These effects will permeate into the entire economy which will witness increased in income, savings and investment patterns of small-scale agro-based entrepreneurs..