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Agricultural credit provision: What really determines farmers’ participation and credit rationing?

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  • Asante-Addo, Collins
  • Mockshell, Jonathan
  • Siddig, Khalid
  • Zeller, Manfred

Abstract

This paper analyzes determinants of farmers’ participation and credit rationing using survey data from Ghana. The Garrett Ranking Technique is used to analyze farmers’ reasons for participation or non-participation in credit programs. A probit regression model is also applied to estimate factors influencing farm households’ participation in credit programs. Farm households participate in credit programs because of improved loan access for farming purposes and savings mobilization. Fear of loan default and lack of savings are reasons for non-participation in credit programs. Furthermore, membership in farmer based organizations and the household head’s formal education are positively associated with farmers’ participation in credit programs. The likelihood of farmers being credit rationed (i.e., they were rejected or the amount of credit they applied for was reduced) is less likely among higher income farmers and members of organizations. Policy strategies aiming to improve credit access should educate farmers and strengthen farmer based organizations that could serve as entry points for credit providers. Such market smart strategies have the potential to improve farmers’ access to timely credit and to reduce rural poverty.

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  • Asante-Addo, Collins & Mockshell, Jonathan & Siddig, Khalid & Zeller, Manfred, 2016. "Agricultural credit provision: What really determines farmers’ participation and credit rationing?," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249283, African Association of Agricultural Economists (AAAE).
  • Handle: RePEc:ags:aaae16:249283
    DOI: 10.22004/ag.econ.249283
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    2. Kuhn, Lena & Bobojonov, Ihtiyor, 2023. "The role of risk rationing in rural credit demand and uptake: lessons from Kyrgyzstan," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 83(1), pages 1-20.
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    6. Martey, Edward & Etwire, Prince M. & Mockshell, Jonathan, 2021. "Climate-smart cowpea adoption and welfare effects of comprehensive agricultural training programs," Technology in Society, Elsevier, vol. 64(C).
    7. Ngaruko, Deus D., 2022. "Transaction Costs of Group Microfinancing Models and their Effects on Family-Owned Business Performance in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    8. Abera Alemu & Zerhun Ganewo, 2023. "Impact Analysis of Formal Microcredit on Income of Borrowers in Rural Areas of Sidama Region, Ethiopia: A Propensity Score Matching Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 65-85, March.
    9. Hong Sun & Valentina Hartarska & Lezhu Zhang & Denis Nadolnyak, 2018. "The Influence of Social Capital on Farm Household’s Borrowing Behavior in Rural China," Sustainability, MDPI, vol. 10(12), pages 1-20, November.
    10. Tchékpo Fortuné OGOUVIDE & Ygué Patrice ADEGBOLA & Afio ZANNOU & Gauthier BIAOU, 2022. "Determinants of Farmer’s Participation in Formal Microcredit Markets in Benin," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 13(2), pages 77-95, December.
    11. Ojo, Temitope & Adetoro, Adetoso A. & Ogundeji, Abiodun A. & Belle, Johannes A., 2021. "Quantifying the Determinants of Climate Change Adaptation Strategies and Farmers’ Access to Credit in South Africa," 2021 Conference, August 17-31, 2021, Virtual 315853, International Association of Agricultural Economists.
    12. Oliynyk, Oleksandr & Makohon, Vitaliy & Mishchenko, Vitaliya & Brik, Svitlana, 2020. "Ефективність Витрат На Впровадження Нових Сортів І Гібридів У Рослинництві," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 6(4), December.
    13. Sandeep Kandikuppa & Clark Gray, 2022. "Climate change and household debt in rural India," Climatic Change, Springer, vol. 173(3), pages 1-27, August.
    14. Blessing Ropafadzo Chigunhah & Ezekia Svotwa & Gerald Munyoro & Tendai J. Mabvure & Ignatius Govere, 2020. "Private Capital Formation Activities and Bank Credit Access Among Farmers in Zimbabwe," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 225-235.
    15. Jisha, K K & Palakkeel, Prashobhan, 2023. "Availability of agricultural credit: determinants, marginal effect, and predicted probability," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(4), December.
    16. Anette Ruml & Martin C. Parlasca, 2022. "In‐kind credit provision through contract farming and formal credit markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 402-425, April.
    17. Hueth, Brent M. & Hutchins, Jared, 2018. "Production Credit Associations and Agricultural Productivity Change in the United States, 1920-1940," 2018 Annual Meeting, August 5-7, Washington, D.C. 274384, Agricultural and Applied Economics Association.
    18. Anjani Kumar & Vinay K. Sonkar & K. S. Aditya, 2023. "Assessing the Impact of Lending Through Kisan Credit Cards in Rural India: Evidence from Eastern India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(3), pages 602-622, June.

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    Agribusiness; Agricultural Finance;

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