Assessing the impact of agricultural market participation on banking access and savings: evidence from Ghana

This paper examines the extent to which participation in agricultural markets has long-term effects on rural household livelihoods. While most related studies have focused on the impact on illiquid assets such as consumer durables and livestock owned by rural households, this study focuses on access to basic banking and savings devices at both the extensive and intensive margins. Drawn on the sixth and seventh waves of the Ghana Living Standard Survey and using an instrumental variables approach, the econometric analysis provides results suggesting that rural households that commercialize maize are about 8.6%, 9%, and 19% more likely to be members of savings and loan schemes, cooperative or credit unions, and Rotating Savings and Credit Associations, respectively. At the intensive margin, we find that maize commercialization is associated with a 53% and 41% increase in the amount saved and the balance of savings, respectively. Governments and international development partners in sub-Saharan Africa have devoted considerable resources to help smallholder farmers shift from subsistence farming to market-oriented agriculture as a key means of lifting rural households out of poverty. As access to liquidity acts more effectively as a buffer and mitigates the negative welfare effects of unforeseen adverse shocks, our findings are consistent with this agenda.