The Role of Credit Access in Improving Cocoa Production in West African Countries

Abstract

This study uses survey data to examine the role of access to credit on cocoa production, in West African cocoa production countries under conditions of agricultural policy liberalization. The study specifies and estimates econometric models to simulate the counterfactual of what cocoa production would be in the absence of credit facilities. The survey results show that about 54% of cocoa farmers have access to credit in Nigeria, and respectively 37% in Cameroon, while in Ghana and Cote d’Ivoire only a few cocoa farmers have access to credit. We find that the cocoa farmer’s capacity such as, the cocoa farm size, and the mutuality status of the farmer are more important as a determinants of cocoa farmers access to credit as well as another set of variables like the level of infrastructural development in the village, the lending reputation of the region as more determinant of extent cocoa farmer access to credit. We also find that access to credit by cocoa farmers has a positive spillover effect on cocoa production. The research concludes that there is a need of promoted credit institutions specialized in saving mobilization and credit supply to farmers in general and cocoa farmers specifically. These could include voluntary saving and credit cooperatives, which could pool funds from surplus units for lending to deficit farmers so as to smooth seasonal discrepancies between cocoa farmer income and expenditure.