IDEAS home Printed from https://ideas.repec.org/a/ags/ajaees/357309.html

Economic and Institutional Elements of Loan Repayment Capacity of Smallholder Farmers in the Transitional Zone of Ghana

Author

Listed:
  • Abankwah, Vincent
  • Awunyo-Vitor, Dadson
  • Seini, Yussif Abdul-Rahman

Abstract

Farmers in developing countries have been identified as the most defaulting group of credit beneficiaries. While credit remains the second largest source of farm capital, prospective borrowers are denied access to credit as a result of high loan delinquency among farmers. This phenomenon does not only reduce farmer productivity but contributes also to dwindling household income and food security. In order to improve agricultural credit programmes and make them sustainable, it is imperative to examine the loan repayment capacity of farmers. The objective of this study was to identify the borrower-specific characteristics as well as institutional factors that determine the loan repayment capacity of smallholder farmers. The study was conducted in the Ejura-Sekyedumasi District and Mampong Municipality of Ghana. Primary data used for this study were collected from a cross section of smallholder farmers who received credit from formal and semi-formal credit institutions for farming activities between 2009 and 2011 farming seasons. A two-stage sampling technique was used to select 120 loan beneficiary farmers comprising 60 defaulters and 60 non-defaulters. The data set was analyzed using descriptive statistics and probit model. The study revealed that farmer’s age, sex, household membership, income and farming systems significantly influence loan repayment capacity. More so, relatively low interest rate, post disbursement monitoring, moratorium and repayment schedule were institutional factors found to influence loan repayment by smallholder farmers.

Suggested Citation

  • Abankwah, Vincent & Awunyo-Vitor, Dadson & Seini, Yussif Abdul-Rahman, 2016. "Economic and Institutional Elements of Loan Repayment Capacity of Smallholder Farmers in the Transitional Zone of Ghana," Asian Journal of Agricultural Extension, Economics & Sociology, Asian Journal of Agricultural Extension, Economics & Sociology, vol. 9(3).
    • Handle: RePEc:ags:ajaees:357309
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/357309/files/Abankwah932015AJAEES21946.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ghate, P. B., 1992. "Interaction between the formal and informal financial sectors: The Asian experience," World Development, Elsevier, vol. 20(6), pages 859-872, June.
    2. William Derban & Jane Binner & Andy Mullineux, 2005. "Loan Repayment Performance in Community Development Finance Institutions in the UK," Small Business Economics, Springer, vol. 25(4), pages 319-332, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adan Guyo Shibia, 2024. "Households’ coping mechanisms with droughts and floods using finance, non-finance and the social safety net measures: evidence from Kenya," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 22237-22259, September.
    2. Mohamed Amara, 2016. "The linkages between formal and informal employment growth in Tunisia: a spatial simultaneous equations approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 203-227, January.
    3. Christoph Kneiding & Paul Tracey, 2009. "Towards a Performance Measurement Framework for Community Development Finance Institutions in the UK," Journal of Business Ethics, Springer, vol. 86(3), pages 327-345, May.
    4. Ali AL-Sharafat & Tala Qtaishat & Mohammed Majdalawi, 2013. "Loan Repayment Performance of Public Agricultural Credit Agencies: Evidence from Jordan," Journal of Agricultural Science, Canadian Center of Science and Education, vol. 5(6), pages 221-221, May.
    5. Bilau, José & St-Pierre, Josée, 2018. "Microcredit repayment in a European context: evidence from Portugal," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 85-96.
    6. Gupta, Vivek & Bhandari, Basu D. & Gautam, Tej K., 2016. "Choice of Income Generating Activities by Nepalese Farmers," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230131, Southern Agricultural Economics Association.
    7. García-Figal, Alejandro & García-Borroto, Milton & Lage-Codorniu, Carlos & Mulet, Roberto & Lage-Castellanos, Alejandro, 2025. "Dynamics and predictability in informal currency markets: The case of the Cuban Peso," Emerging Markets Review, Elsevier, vol. 69(C).
    8. Otima, Ruth M. A., 1994. "Predicting loan repayment performance: a case of Kenyan farm borrowers," ISU General Staff Papers 1994010108000018175, Iowa State University, Department of Economics.
    9. repec:ilo:ilowps:408917 is not listed on IDEAS
    10. P. R. Shukla & Ashish Rana & Amit Garg & Manmohan Kapshe & Rajesh Nair, 2006. "Global climate change stabilization regimes and Indian emission scenarios: Lessons for modeling of developing country transitions," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(3), pages 205-231, January.
    11. Fang, Xiaoqing & Guo, Huixiao & Huang, Shupei & Wang, Xinya, 2025. "Do private lending risks exacerbate urban economic imbalances? Evidence from 293 Chinese cities," Finance Research Letters, Elsevier, vol. 74(C).
    12. Prof. R.W Gakure & John Karanja Ngugi & Peter Musangi Ndwiga & Simon Maina Waithaka, 2012. "Effect 0f Credit Risk Management Techniques 0n The Performance 0f Unsecured Bank Loans Employed Commercial Banks In Kenya," International Journal of Business and Social Research, LAR Center Press, vol. 2(4), pages 221-236, August.
    13. Cherry Wyle G. Layaoen & Kazushi Takahashi, 2022. "Can microfinance lending crowd out informal lenders? Evidence from the Philippines," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(2), pages 379-414, March.
    14. Menkhoff, Lukas & Rungruxsirivorn, Ornsiri, 2009. "Village Funds and Access to Finance in Rural Thailand," Hannover Economic Papers (HEP) dp-417, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    15. Awotide, B.A. & Abdoulaye, Tahirou & Alene, Arega & Manyong, Victor M., 2015. "Impact of Access to Credit on Agricultural Productivity: Evidence from Smallholder Cassava Farmers in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 210969, International Association of Agricultural Economists.
    16. Amurtiya Michael & Yuniyus Dengle Giroh & Mark Polycarp & Zubairu Emmanuel Ashindo, 2018. "Analysis of Rural Farm Households' Access to Formal Agricultural Credit in Yola South Local Government Area, Adamawa State, Nigeria," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(4), pages 947-954.
    17. Prof. R.W Gakure & John Karanja Ngugi & Peter Musangi Ndwiga & Simon Maina Waithaka, 2012. "Effect 0f Credit Risk Management Techniques 0n The Performance 0f Unsecured Bank Loans Employed Commercial Banks In Kenya," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(4), pages 221-236, August.
    18. Guo, Huixiao & Wang, Ruohan & Wang, Xinya, 2024. "Does the development of FinTech increase the risk of private lending ? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    19. Elsa Assidon, 1996. "L' « approfondissement financier » : épargne et crédit bancaires," Revue Tiers Monde, Programme National Persée, vol. 37(145), pages 153-171.
    20. Anita Gill, 2006. "Interlinked Agrarian Credit Markets in a Developing Economy: A Case Study of Indian Punjab," Working Papers id:760, eSocialSciences.
    21. Fennee Chong, 2021. "Loan Delinquency: Some Determining Factors," JRFM, MDPI, vol. 14(7), pages 1-7, July.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ajaees:357309. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://journalajaees.com/index.php/AJAEES/index .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.