Trade credit from agrochemical vendors as an alternative source of finance for cabbage producers in the Bono East Region of Ghana
ISSN: 0002-1466
Article publication date: 15 April 2022
Issue publication date: 19 January 2023
Abstract
Purpose
The purpose of this study is to examine trade credit from agrochemical vendors as an alternative source of finance for cabbage producers in the Bono East Region of Ghana. The determinants of trade credit supply and impact on cabbage producer’s profitability are investigated.
Design/methodology/approach
The study sample size is 260. The perception index, probit regression, negative binomial regression and the propensity score matching (PSM) was employed to assess the perception of trade credit, factors influencing trade credit supply and the impact of trade credit supply on the cabbage producer’s profitability and agrochemical vendor’s welfare respectively.
Findings
The perception index analysis revealed that the agrochemical vendors, in general, had a positive perception of trade credit. Different groups of factors influence trade credit supply. Further along, the number of times trade credit was used by the cabbage producers was influenced by several factors. On the PSM result, trade credit use had a significant positive impact on the cabbage producer’s profitability. In detail, all the matching estimations revealed that profitability increased above Gh¢ 4,000.00 (US$ 692.04). Likewise, the robustness check result (Inverse Probability Weighted Regression Adjustment (IPWRA)), was no different from the matching estimations. Generally, the result indicates that the impact of trade credit supply on the agrochemical vendor's welfare using total household expenditure, total savings and income as proxy variables for welfare were positive.
Originality/value
Trade credit has encountered less attention in the agricultural finance discourse; however, this study makes an imperative contribution on the same. Specifically, the study reveals the determinants of trade credit supply from agrochemical vendors and a positive impact of trade credit use on the cabbage producer’s profitability, a result which has not been investigated in the trade credit literature.
Keywords
Acknowledgements
The authors express profound gratitude to Miss Angelina Osei for her tremendous effort on proofreading the manuscript. Amprofi Ampah Amproche, a geospatial analyst at the Earth Observation Research and Innovation Centre (EORIC) of UENR, is also not forgotten for the construction of the study area map.
Citation
Amrago, E.C. and Mensah, N.O. (2023), "Trade credit from agrochemical vendors as an alternative source of finance for cabbage producers in the Bono East Region of Ghana", Agricultural Finance Review, Vol. 83 No. 1, pp. 43-82. https://doi.org/10.1108/AFR-11-2021-0155
Publisher
:Emerald Publishing Limited
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