Impact of agricultural credit on farm income under the Savanna and Transitional zones of Ghana

2019 ◽  
Vol 79 (1) ◽  
pp. 60-84 ◽  
Author(s):  
Abdul-Hanan Abdallah ◽  
Micheal Ayamga ◽  
Joseph A. Awuni
Keyword(s):  
Selection Bias ◽  
Farm Size ◽  
Farm Income ◽  
Data Set ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Mean Differences ◽  
On Farm ◽  
The Impact

PurposeThe purpose of this paper is twofold: to determine the factors contributing to farm income in the Transitional and Savanna zones of Ghana and to ascertain variations between in the same and across the two locations; and to determine the impact of credit on farm income in each of the two zones and to ascertain the variation in impact of credit across the two locations.Design/methodology/approachIn order to address endogeneity and sample selection bias, the authors draw from the theory of impact evaluation in nonrandom experiment, employing the endogenous switching regression (ESR) while using the propensity score matching (PSM) to check for robustness of the results.FindingsThe results show significant mean differences between some characteristics of households that have access to credit and those that did not have access. Further, the results revealed farm size, labor; gender, age, literacy, wealth and group membership as the significant determinants of both credit access and income in the two zones. With the ESR, credit access increases households farm income by GH¢206.56/ha and GH¢39.74/ha in the Transitional and Savanna zones, respectively, but with the PSM, credit increases farm income by GH¢201.50 and GH¢45.69 and in the Transitional and Savanna, respectively.Research limitations/implicationsThe mean differences in characteristics of the households revealed the presence of selection bias in the distribution of household’s covariates in the two zones. The results further indicate the importance of productive resources, information and household characteristics in improved access to credit and farm income. Also, the results from both methods indicate that credit access leads to significant gains in farm income for households in both zones. However, differences exist in the results of PSM and that of the ESR results.Practical implicationsThe presence of selection bias in the samples suggests that the use of ESR and PSM techniques is appropriate. Further, the results suggesting that enhanced credit access and farm income could be attained through improved access to household resources and information. The results also suggest the need for establishing and expanding credit programs to cover more households in both zones. The differential impact of credit between the two methods employed in each zone revealed the weakness of each model. The low values from PSM could indicate the presence of selection bias resulting from unobservable factors whiles the high values from the ESR could stem from the restrictive assumption of the model. This reinforces the importance of combining mixed methods to check robustness of results and to explore the weakness of each method employed.Originality/valueThe novelty of this study lies in the use of a very extensive and unique data set to decompose the determinants of credit access and farm income and as well as the impacts of credit into zones.

The ripple effect of credit accessibility on the technical efficiency of maize farmers in Ghana

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anthony Siaw ◽  
Yuansheng Jiang ◽  
Martinson Ankrah Twumasi ◽  
Wonder Agbenyo ◽  
Gideon Ntim-Amo ◽  
...  
Keyword(s):  
Technical Efficiency ◽  
Farm Size ◽  
Farm Income ◽  
Agricultural Credit ◽  
Maize Production ◽  
Content Type ◽  
Frontier Analysis ◽  
Access To Credit ◽  
Variable Approach ◽  
The Impact

PurposeThe purpose of this study is to examine the impact of access to credit on technical efficiency (TE) of maize farmers in a developing country, Ghana.Design/methodology/approachThe study employed an instrumental variable approach and the stochastic frontier analysis (SFA) method for the estimation of the results.FindingsThe study found that farmers who have access to agricultural credit stand the chance of increasing TE by a margin of 8%, which also influences the maize production than those who did not have access to credit. The average TE score of the farmers was 74%. The study also found out that factors like membership, gender, farmers' access to credit, age and social network determine farmers' possibility of accessing agricultural credit. The study finds out that returns to size are increasing among the maize farmers and that significant improvement in efficiency can be realized by increasing the level of input used in production. Also, factors such as farm size, labor, seeds and fertilizer are the essential determinants of maize production output. Also, gender, extension, age, off-farm income, access to credit and membership were significant factors influencing technical inefficiency (TI).Originality/valueThe paper contributes to the existing literature on agricultural credit on rural agricultural development. The problem of endogeneity associated with access to credit, which has been considered by other researchers, is dealt with this study. This paper also provides information to government policymakers, practitioners and all other stakeholders in the maize sub-sectors and also will benefit small farmers outside the study area.

The role of savings mobilization on access to credit: a case study of smallholder farmers in Ghana

2019 ◽  
Vol 80 (2) ◽  
pp. 275-290 ◽  
Author(s):  
Martinson Ankrah Twumasi ◽  
Yuansheng Jiang ◽  
Frank Osei Danquah ◽  
Abbas Ali Chandio ◽  
Wonder Agbenyo
Keyword(s):  
Financial Market ◽  
Financial Management ◽  
Smallholder Farmers ◽  
Farm Size ◽  
Eastern Region ◽  
Unique Contribution ◽  
Data Set ◽  
Content Type ◽  
Access To Credit ◽  
The Impact

Purpose The purpose of this paper is to examine the effect of savings mobilization on access to credit among smallholder farmers’ in the Birim central municipality of Ghana. Design/methodology/approach A cross-sectional primary data set was used to estimate the factors influencing smallholder farmers’ access to credit and size of loan to be borrowed using the IV-Probit and IV-Tobit model. Findings The results of the study revealed that savings mobilization has a positive significant impact on access to credit and the total amount of credit one can borrow as well. Other control variables such as transaction cost and farm size depicted a negative significant impact on access to credit. Land ownership, member of an association, household size, years of farming experience and education also showed a positive significant impact on access to credit. Research limitations/implications The paper only examined the savings effect on credit accessibility among smallholder farmers in one of the municipality’s in the Eastern region of Ghana. Future research should consider all or many municipality for an informed generalization of findings. Practical implications This paper provides evidence that smallholder farmers knowledge on the financial market is poor and it would require the policymakers or NGOs to organize financial management training programs so that the farmers high ignorance of the financial market will significantly reduce. Originality/value Although existing studies have examined smallholder farmers’ access to credit, the unique contribution of this paper is the analysis of the impact of saving mobilization on credit accessibility in Ghana, a major access to credit determinant in the financial market. In addition, those researchers who factored in savings as an access to credit determinant did not also consider the casual relationship between these two variables, thus, the present of endogeneity of which this paper does.

Fertilizer adoption, credit access, and safety nets in rural Ethiopia

2014 ◽  
Vol 74 (3) ◽  
pp. 290-310 ◽  
Author(s):  
Million Tadesse
Keyword(s):  
Third Party ◽  
Safety Nets ◽  
Data Set ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Rural Ethiopia ◽  
Fertilizer Adoption ◽  
The Impact ◽  
Credit Contract

Purpose – The purpose of this paper is to investigate the impact of access to credit and safety nets on fertilizer adoption in rural Ethiopia. Design/methodology/approach – A panel data set collected in 2005 and 2007 on 278 households and over 5,700 plots from the Southern Highlands of Ethiopia is examined. The authors developed a theoretical model relating input use and credit contract under third-party credit collateral agreement. The estimation is based on instrumental variables regressions to account for the endogeneity of credit access, and safety nets in fertilizer demand equation. Findings – Despite increasing trends in fertilizer and improved varieties adoption since mid-2003, only 22 percent of the plots in the sample is actually received fertilizer. Households with more assets measured by livestock wealth are more likely to adopt fertilizer but less likely to participate in the local credit market as they have better savings that could be used to buy fertilizer/improved seeds without credit contract. This suggests poorer farmers heavily depend on credit than wealthier. Participation in safety nets programs did not contribute for increased use of fertilizer suggesting that the program either competes with agricultural labor or the low wage income was not enough to pay for farm inputs. Practical implications – The findings show that with a heavier reliance on credit by poorer farmers it appears that much might be gained by targeting policies toward increasing credit access to this group. Originality/value – Studies that utilize repeated plot- and household-level observations are limited. To the knowledge, this is the first study showing the relationship between credit accesses, public work program and fertilizer adoption over time in rural Ethiopia.

The impact of social security policies on farmland reallocation in rural China

2018 ◽  
Vol 10 (4) ◽  
pp. 626-646
Author(s):  
Li Huang ◽  
Rong Tan
Keyword(s):  
Social Security ◽  
Security Policy ◽  
Rural China ◽  
Land Development ◽  
Security Policies ◽  
Farm Income ◽  
Data Set ◽  
Content Type ◽  
The Impact ◽  
The Village

Purpose The purpose of this paper is to explore the causality between social security policies and farmland reallocation in rural China. Design/methodology/approach It quantitatively analyzes the impact of each ongoing social security policy on farmland reallocation based on a data set from the 2011 China Health and Retirement Longitudinal Study (CHARLS, 2011). Findings The study finds that the inclination of a village farmers’ collective to reallocate farmland due to changes in the village population increased if social security policies do not effectively cover the village because farmers rely primarily on income from farmland to cover their basic living expenses. However, if social security policies provide adequate coverage, then farmers do not rely entirely on on-farm income and the likelihood of farmland reallocation decreases. Furthermore, the effectiveness of social security policies includes not only coverage but also the sufficiency of the security policies provided. Research limitations/implications First, the authors use only cross-sectional data in this study, which may result in biased estimation and also limit temporal examination of the impact of social security systems, farmland reallocation and related policy variables. This limitation may be especially important in China because the country is undergoing a rapid socioeconomic transition. However, the research is constrained by the available data. Furthermore, there could be endogeneity problems that are difficult to address, given the current data set. These problems could involve the impacts of village-level economic, natural and social variables, the implementation of related public policies (land development and consolidation, land expropriation, etc.) and other economic variables. Practical implications These findings may provide implications for related policy reform in the near future. Originality/value These findings may facilitate a recognition and understanding of the causality between social security policies and farmland reallocation in rural China.

Tax policy and farm capital investment: Section 179 expensing and bonus depreciation

2016 ◽  
Vol 76 (2) ◽  
pp. 246-269 ◽  
Author(s):  
James M Williamson ◽  
Sarah Stutzman
Keyword(s):  
Fixed Effects ◽  
Capital Investment ◽  
Agricultural Sector ◽  
Physical Capital ◽  
Cost Recovery ◽  
Farm Income ◽  
Content Type ◽  
Bonus Depreciation ◽  
On Farm ◽  
The Impact

Purpose – The purpose of this paper is to estimate the impact of Internal Revenue Code cost recovery provisions – Section 179 and “bonus depreciation” – on farm capital investment. Design/methodology/approach – The authors construct a synthetic panel of data consisting of cohorts of similar farms based on state and production specialization using the USDA’s Agricultural Resource Management Survey for years 1996-2012. Employing panel data methods, the authors are able to control for time-invariant fixed effects, as well as the effects of past investment on current investment. Findings – The authors estimate statistically significant investment demand elasticities with respect to the Section 179 expensing deduction of between 0.28 and 0.50. A change in bonus depreciation, on average, had little impact on capital investment. Practical implications – The estimates suggest there is a modest effect of the cost recovery provisions on investment overall, but a stronger effect on farms that have more than $10,000 in gross cash farm income. There are other implications for the agricultural sector: the provisions may encourage technology adoption with its associated benefits, such as reduced cost of production and improved conservation practices. On the other hand, the policy could contribute to the growing concentration in production as large commercial farms expand their operated acreage to take advantage of increasingly efficient physical capital. Originality/value – To the authors’ knowledge, this is the first research to use a nationally representative dataset to estimate to impact of Section 179 and “bonus depreciation” on farm investment. The findings provide evidence of the provisions’ impact on farm capital purchases.

Bridging the credit gap for sustainable medicinal plant value chain development in Northwestern Vietnam

2019 ◽  
Vol 79 (4) ◽  
pp. 443-466
Author(s):  
Do Xuan Luan
Keyword(s):  
Medicinal Plant ◽  
Value Chain ◽  
Farm Size ◽  
Heckman Selection Model ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Organic Certification ◽  
Credit Gap ◽  
Household Heads

Purpose The purpose of this paper is to explore the existence and determinants of the credit gap in the cinnamon value chain development in Northwestern Vietnam. Design/methodology/approach A multi-stage sampling of 548 cinnamon households and a Heckman Selection Model were applied to examine their credit access constraints. In-depth interviews with cooperatives, enterprises, banks and relevant government agencies were further conducted to explain the credit gap. Findings In the total 52.74 percent of households that received credit, 24.56 percent of them received an insufficient amount of credit as registered. In addition, 35.77 percent of total households are credit rationed. Although all enterprises and cooperatives had been successful in applying for credit as long as they have collateral, none of them received the full credit amount requested. The credit amount received satisfied 80.64, 43.03 and 44.28 percent of the demand by households, cooperatives and enterprises, respectively. The lack of valuable collateral assets is the most important factor explaining this credit gap. Moreover, membership in a farmer-based union or ownership of a bank account increases the probability of access to credit. Educated household heads with a larger farm size and the Kinh ethnic majority are positively associated with a larger amount of credit. Households with conventional cinnamon farming, more dependents and union non-membership are more likely to be credit rationed. Practical implications A reform on collateral management, facilitating access to bank accounts, capacity building for local farmer-based unions, organic certification, granting land use rights and facilitating a platform to share reliable information between relevant actors are needed to bridge the credit gap. Originality/value This paper analyses the determinants of credit access constraints by key actors in a medicinal plant value chain that was insufficiently discussed by previous studies in the field.

Small growers’ direct participation in the market and its impact on farm income

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ujjwal Kanti Paul ◽  
Gurudas Das ◽  
Malabika Das ◽  
Tanuj Mathur
Keyword(s):  
Small Sample ◽  
Series Data ◽  
Operating Efficiency ◽  
Farm Income ◽  
Local Market ◽  
Marketing System ◽  
Content Type ◽  
Direct Participation ◽  
On Farm ◽  
The Impact

PurposeThe existing literature on linking growers directly with the market mostly overlooks the case of smallholders. They grow commercial–perishable crops and have to rely on the efficacy of the marketing system. The present paper intends to fill this void.Design/methodology/approachThe paper studies the performance of two local markets among 216 pineapple producers and 50 traders using the structure–conduct–performance framework. Following which the authors attempt to unravel the determinants of growers' direct participation in the market and the impact of such involvement on the farm income using the Heckman two-stage treatment effect model.FindingsThe study analysis shows that the likelihood of growers’ direct participation in markets, found oligopolistic, increases with education, price information and family labor unit, while decreases with the growers' age, distance from market and the footfall of intermediaries at the farm gate. The second stage of the model has established a positive impact of participation on farm income.Research limitations/implicationsThe small sample size could restrict generalization. The authors used only operating efficiency as an indicator of the performance of the marketing system due to the unavailability of district-level time series data on pineapple pricing.Originality/valueThis study shows that local food markets are oligopolistic. Growers fetch very less share in consumers' price and become vulnerable to food insecurity. The study highlights the determinants of growers' direct participation in the local market and the impact of such involvement on farm income.

Agricultural credit rationing in Ghana: what do formal lenders look for?

2014 ◽  
Vol 74 (3) ◽  
pp. 364-378 ◽  
Author(s):  
Dadson Awunyo-Vitor ◽  
Ramatu Mahama Al-Hassan ◽  
Daniel Bruce Sarpong ◽  
Irene Egyir
Keyword(s):  
Financial Institutions ◽  
Agricultural Sector ◽  
Credit Rationing ◽  
Farm Size ◽  
Farm Income ◽  
Two Stage ◽  
Agricultural Credit ◽  
Content Type ◽  
Access To Credit ◽  
Improve Access

Purpose – The purpose of this paper is to investigate the determinants of agricultural credit rationing by formal lenders in Ghana. Design/methodology/approach – This study employed descriptive statistics, analysis of variance (ANOVA) and Heckman's two-stage regression model to identify types of rationing faced by farmers and investigate factors that influence agricultural credit rationing by formal financial institutions. Data used in this study are gathered through a survey of 595 farmers in seven districts within Brong Ahafo Region of Ghana. Findings – The result reveals that farmers face three types of rationing. Evidence from the Heckman two-stage models shows that engagement in off farm income generating activities, increase in farm size, positive balances on accounts and commercial orientation of the farmers has the potential to reduce rationing of credit applicants by formal lenders. Practical implications – The results provide information on the factors that need to be considered as important in an attempt to reduce agricultural credit rationing by formal lenders. Originality/value – The value of this study is that farmers would use the results of this study to improve access to required amount of agricultural credit from formal financial institutions. The information would also benefit stakeholders in the agricultural sector, particularly youth in agriculture program organized by Ministry of Food and Agriculture in Ghana as how to improve access to credit and reduce rationing of program participants by formal financial institutions.

Farm credit access, credit constraint and productivity in Ghana

2017 ◽  
Vol 77 (4) ◽  
pp. 446-462 ◽  
Author(s):  
Samuel Sekyi ◽  
Benjamin Musah Abu ◽  
Paul Kwame Nkegbe
Keyword(s):  
Group Membership ◽  
Household Size ◽  
Farm Size ◽  
Baseline Survey ◽  
Future Research ◽  
Credit Constraint ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Feed The Future

Purpose The purpose of this paper is to examine farmers’ access to credit, credit constraint, and productivity in the Northern Savannah ecological zone of Ghana. Design/methodology/approach Secondary data from the Ghana Feed the Future baseline survey involving a total sample of 2,968 farm households were used. The conditional mixed process (CMP) framework was applied to estimate access to credit, credit constraint, and productivity simultaneously. As a system estimator the CMP corrects for possible heterogeneity and sample selection bias. Findings The results from the estimations revealed that age, literacy, farm non-mechanized equipment, and group membership were the variables influencing farmers’ access to credit. Credit constraint conditions were determined by household size, locality, group membership, and household durable assets. Finally, the results showed that productivity of farmers was dependent on marital status, household size, locality, farm size, commercialization, farm mechanized equipment, group membership, and household durable assets. Originality/value This paper is the first, to the best of the authors’ knowledge, to use the CMP framework to jointly estimate access to credit, credit constraint, and productivity. The results indicate that estimating credit access and constraint models separately would have yielded biased estimates. Thus, this paper informs future research on farmers’ credit access, credit constraint, and productivity for informed policymaking.

Are African female farmers disadvantaged on the microfinance lending market?

2016 ◽  
Vol 76 (4) ◽  
pp. 477-493 ◽  
Author(s):  
Arieska Wening Sarwosri ◽  
Ulf Römer ◽  
Oliver Musshoff
Keyword(s):  
Gender Effects ◽  
Microfinance Institutions ◽  
African Countries ◽  
Data Set ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Social Mission ◽  
Female Farmers ◽  
Microfinance Institution

Purpose The purpose of this paper is to examine whether social and/or cultural obstacles faced by African female farmers diminish their accessibility to lending opportunities provided by a commercial microfinance institution; and affect their repayment performance. Design/methodology/approach The underlying data set is comprised of information regarding 9,710 farmers from Madagascar and was provided by the AccèsBanque Madagascar. Logit and Tobit models are applied to determine gender effects on loan accessibility and repayment performance, respectively. Findings Even though female farmers are associated with a lower repayment performance, they have a higher rate of loan application approval compared to male farmers. Research limitations/implications The results are limited to Madagascar and other African countries with similar socio-economic conditions. Social implications Commercial microfinance institutions still provide access to credit for disadvantaged groups, such as female farmers. Originality/value To the best of the authors’ knowledge, this is the first study investigating gender-specific credit access and repayment performance of rural African farmers using a data set from a commercial microfinance institution without a social mission for females.

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