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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.

Suggested Citation

  • Asante-Addo, Collins & Mockshell, Jonathan & Siddig, Khalid & Zeller, Manfred, 2016. "Agricultural credit provision: What really determines farmers’ participation and credit rationing?," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249283, African Association of Agricultural Economists (AAAE).
  • Handle: RePEc:ags:aaae16:249283
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    1. Dercon, Stefan, 1998. "Wealth, risk and activity choice: cattle in Western Tanzania," Journal of Development Economics, Elsevier, vol. 55(1), pages 1-42, February.
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    Keywords

    Agricultural credit; Credit rationing; Participation; Farmer cooperatives; Ghana; Agribusiness; Agricultural Finance;

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