Effect of Bank Holding Company Structure on Farmers’ Financial Welfare in Nigeria

This study examines the impact of bank holding structure on the financial welfare of farmers. We used an expost facto research design and studied all the 18 deposit money banks in Nigeria. We used dummy variable to measure bank conglomerate structure for the period between 2001 and 2018. We also identified the features of financial holding companies based on firms' specific variables including portfolio condition, competitive standing, equity characteristics and sizes. Based on our analysis, bank holding structures significantly and positively affect banks' propensity to create risk assets to farmers (coefficient=0.34; p-value less 5%). This implies that ring fencing banks leads to increase in credit availability to farmers and consequently their welfare advancement in Nigeria. Banks with holding structure have competitive advantage and this competiveness benefits farmers significantly (coefficient=0.05; p-value < 0.05). Our analysis also shows that banks with holding structures diversify into non-interest source of revenue, which yields positive and significant effect on farmers' financial welfare (coefficient= 2.05). Thus, diversifying conglomerating banks can outperform their peers in terms of risk asset making for farmers to extent that relative to non conglomerate banks, up to 2.05% of credit is allocated to farmers for every unit change in bank market due to holding structures. Variation in deposit demands, and gross assets were found to advance loans to farmers. However, default risks and liquidity risk of conglomerate banks limits their credit availability to farmers, which implies that conglomerate banks are highly sensitive to liquidity and default risks. We also found that conglomerate banks allocates risks asset to farmers based on the national economic growth level. Thus, as the economy improves conglomerate banks' desire to make risk assets to farmers also increases. We recommend that regulators should improve economic growth in order to draw banks into lending to farmers. Conglomerate banks should be protected from default shocks and liquidity risks in order to encourage them to lend more to farmers.