Abstract
This paper explores access to agricultural microcredit in Ghana using household survey data collected for the 2013/2014 farming season. The study approaches the access to microcredit from two angles pertaining to the factors influencing access to loan and when accessed, the determinants of loan size. Since these two choices are related, the Heckman selection model was chosen as the analytical tool for addressing the possible presence of sample selectivity bias in the loan size regression. A multi-stage stratified random sampling technique was used to select 300 smallholder rice farmers from three irrigation schemes in Northern Ghana who were interviewed using a semi-structured questionnaire. The study revealed that the following factors influence access to agricultural microcredit in Northern Ghana: gender, household income, farm capital, improved technology adoption, contact with extension, the location of the farm, and awarenes s of lending institutions in the area. Gender, household size, farm capital, cattle ownership and improved technology adoption were the significant factors determining loan size. The study recommends the improvement of extension service delivery to smallholder farmers to enable them to access microcredit facilities for agricultural production. Key words: Agricultural microcredit, binary probit model, Heckman selection model, loan size, Northern Ghana, smallholder farmers.
Highlights
This paper explores access to agricultural microcredit in Ghana using household survey data collected for the 2013/2014 farming season
This paper explores access to agricultural microcredit in Ghana by applying Heckman’s sample selection model to a household survey data collected for the 2013/2014 farming season
This is because smallholder farmers often require small loans which are difficult to administer while majority of them lack the needed collateral to be able to borrow from formal sources
Summary
This paper explores access to agricultural microcredit in Ghana by applying Heckman’s sample selection model to a household survey data collected for the 2013/2014 farming season. Access to agricultural microcredit remains a critical challenge to smallholder farmers in many developing countries including Ghana. This is because smallholder farmers often require small loans which are difficult to administer while majority of them lack the needed collateral to be able to borrow from formal sources. Where collateral requirements are met, the sheer size of potential borrowers always seems to exclude others from borrowing. As noted by Dittoh (2006), access to credit is the topmost priority of smallholder farmers in Northern Ghana where agriculture is the main economic activity
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