Abstract: The study researched the extent to which Smallholder Loan Scheme (SHLS) has been able to meet credit needs of the resource poor and improve their farm production. The effectiveness of the credit programme depends on the availability of adequate funds to enable farmers purchase the necessary technologies hence the need to compare the before merging beneficiaries with after merging counterparts. The study evaluated the production efficiency of farmers participating in the credit scheme and determined the effects of credit utilization on traditional farming in southwestern Nigeria. A multi-stage sampling technique was used to collect primary data using structured questionnaire from 216 beneficiaries from the selected financial institutions in the study area. Data were analyzed using descriptive statistics, multiple regression and Chow test. The study showed that the after margin beneficiaries are on the average, endowed with relatively more farm resources than their before merging counterparts. When the levels of resources of the latter were expressed as percentages of those of the former, land stood at 60%, hired labour 30%, family labour 48%, fixed capital 20% and modern material input stood at 27%. The marginal value productivities of land area cultivated and local material inputs are higher for before merging beneficiaries than for after merging beneficiaries. The foregoing is an indication of basic differences in the production behaviour of the two sets of farmers and thus can be concluded that the after merging beneficiaries are more technically efficient than the before merging beneficiaries.