Abstract
Agriculture remains the foundation of economic growth for any economy irrespective of their level of development. Being aware of the imperative role of finance in the endogenous growth model, it is admitted that access and usage of finance is critical for the growth of the agriculture sector. Access to and usage of financial services would enable the incorporation of rural farmers into the financial system. In the light of this revelation, this paper examined Cointegration Analysis of Agricultural Growth and Financial Inclusion in Ghana. Time series data from the period of 1980-2014, Johansen Cointegration approach coupled with Fully Modified Ordinary Least Square method (FMOLS) for the estimation of long-run relationship between agriculture growth and financial inclusion in Ghana using Eviews 9 was used. The study revealed that, domestic credit to private sector as proxied for usage has an inverse relationship but significant. The paper also revealed that lending interest rate proxy for accessibility of financial services to farmers portrayed significantly positive impact on the growth of agriculture. As provision of financial services alone cannot enable rural farmers attain financial inclusion, there is an urgent need for the provision of domestic credit to the private sector as they help promote economic growth implying that the better the private sector gets, the bigger role they played in the economy. Government should ensure that lending interest rate of both financial and non-financial institutions that support agriculture sector is flexible to enable farmers to easily have access to capital for expansion.
Highlights
As provision of financial services alone cannot enable rural farmers attain financial inclusion, there is an urgent need for the provision of domestic credit to the private sector as they help promote economic growth implying that the better the private sector gets, the bigger role they played in the economy
This paper using time series data covering the period of 1980-2014 and the Johansen cointegration approach coupled with Fully Modified Ordinary Least Square (FMOLS) to examine the long-run relation between the growth of agriculture and financial inclusion in the Ghanaian economy
The results revealed that government expenditure proxy for availability of capital to the agriculture sector or to the rural farmers has significant effect on the growth of agriculture
Summary
Being aware of the imperative role of finance in the endogenous growth model, it is admitted that access to finance is critical for the growth of the agriculture sector the role of financial capital as an element of production to encourage financial development and the need to properly channel credit to rural areas for economic improvement of the poor rural farmers cannot be overlooked. Only 4.7% of adults in rural areas in developing countries internationally have a credit from a formal financial institution and only 5.9% with a bank account, according to Findex data. Regardless of the diverse financial necessities in all the four categories of farmers, both informal and formal financial institutions (FIs) in Africa often fail to supply ample and suitable financial services, especially for agricultural production and agribusiness development of which Ghana is no exception to. Emanating from the concerns iron out by various studies, this paper pursues to fill the huge gap left in literature especially to the lacking of studies on this particular area by seeking answers to the question if financial inclusion can influence the growth of agriculture in Ghana?
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