Agricultural value chain participation and farmers' access to credit in northern Ghana

Timothy Anakwa Osei, Samuel A. Donkoh, Isaac Gershon Kodwo Ansah, Joseph A. Awuni and Mensah Tawiah Cobbinah

Agricultural Finance Review, 2023, vol. 83, issue 4/5, 800-820

Abstract: Purpose - Promoted for its inclusivity, agricultural value chain (AVC) financing leverages social capital and mechanisms such as off-take agreements and forward contracts to reduce borrowing and lending costs and risks for both farmers and lending institutions. AVC financing has been defined as the flow of financial products and services to and among the various actors within the AVC to address constraints of production and distribution and fulfill the needs of those involved in the chain by reducing risk and improving efficiency. This paper investigates how farmers' involvement in AVC affects their access to credit. Design/methodology/approach - The authors collected primary data from 400 crop farmers in northern Ghana through a semi-structured questionnaire and analyzed the data, using the multinomial endogenous switching regression model. Findings - Joint participation in AVC increased the amount of formal and informal credit received by 64 and 78%, respectively, compared to nonparticipation. Similarly, participation in AVC horizontal linkage and AVC vertical linkage increased the amount of formal and informal credit received by 40 and 47% and 46 and 74%, respectively, compared to nonparticipation. Irrigation farming, extension visits, knowledge of AVC in the community, access to a storage facility and trust in contract farming significantly influenced farmers' participation in AVC. Originality/value - The authors’ work offers valuable insights into how different dimensions of value chain participation can impact smallholder farmers' access to credit. This work also underscores the importance of considering both formal and informal credit sources when analyzing the outcomes of value chain participation. The findings could enable formal financial providers to identify, liaise and/or resource informal financial players such as value chain actors to supply both formal and informal credit to farmers in AVCs.

Keywords: Agricultural value chain participation; Credit access; Multinomial endogenous switching regression model; Northern Ghana (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-01-2023-0007

DOI: 10.1108/AFR-01-2023-0007

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