The role of savings mobilization on access to credit: a case study of smallholder farmers in Ghana
ISSN: 0002-1466
Article publication date: 7 January 2020
Issue publication date: 20 March 2020
Abstract
Purpose
The purpose of this paper is to examine the effect of savings mobilization on access to credit among smallholder farmers’ in the Birim central municipality of Ghana.
Design/methodology/approach
A cross-sectional primary data set was used to estimate the factors influencing smallholder farmers’ access to credit and size of loan to be borrowed using the IV-Probit and IV-Tobit model.
Findings
The results of the study revealed that savings mobilization has a positive significant impact on access to credit and the total amount of credit one can borrow as well. Other control variables such as transaction cost and farm size depicted a negative significant impact on access to credit. Land ownership, member of an association, household size, years of farming experience and education also showed a positive significant impact on access to credit.
Research limitations/implications
The paper only examined the savings effect on credit accessibility among smallholder farmers in one of the municipality’s in the Eastern region of Ghana. Future research should consider all or many municipality for an informed generalization of findings.
Practical implications
This paper provides evidence that smallholder farmers knowledge on the financial market is poor and it would require the policymakers or NGOs to organize financial management training programs so that the farmers high ignorance of the financial market will significantly reduce.
Originality/value
Although existing studies have examined smallholder farmers’ access to credit, the unique contribution of this paper is the analysis of the impact of saving mobilization on credit accessibility in Ghana, a major access to credit determinant in the financial market. In addition, those researchers who factored in savings as an access to credit determinant did not also consider the casual relationship between these two variables, thus, the present of endogeneity of which this paper does.
Keywords
Acknowledgements
The authors gratefully acknowledge the financial supports from the Soft Science Program of Sichuan Department of Sci-technology (Grant No. 18RKX0773) and Sichuan Agriculture University, College of Economics. The authors also extend great gratitude to the anonymous reviewers, editors and the editor in chief of the journal, Dr Calum Turvey, for their helpful review and critical comments.
Citation
Ankrah Twumasi, M., Jiang, Y., Osei Danquah, F., Chandio, A.A. and Agbenyo, W. (2020), "The role of savings mobilization on access to credit: a case study of smallholder farmers in Ghana", Agricultural Finance Review, Vol. 80 No. 2, pp. 275-290. https://doi.org/10.1108/AFR-05-2019-0055
Publisher
:Emerald Publishing Limited
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