ASSESSING THE EFFECT OF MAIZE FARMERS’ PARTICIPATION IN OUTGROWER SCHEMES ON CREDIT ACCESS AND UTILIZATION IN THE UPPER EAST REGION

Abstract

Despite the importance of credit to agricultural growth, economic development and poverty reduction, it is reported that access to credit is very low among farmers in Ghana. To overcome this challenge, the government of Ghana and NGOs has made attempt to empower outgrower schemes. Based on this argument, the current study attempts to examine smallholder farmers’ participation in outgrower schemes and quantify its effect on credit access and utilization. Multi-stage sampling technique was used to select 226 maize farmers in the Upper East Region of Ghana. Employing the probit model, the determinants of maize farmers’ participation in outgrower schemes were sex of farmer, farming experience, off-farm work, distance from house-to-output market, ease in accessing credit, land holding, farm size, FBO membership, support from NGOs and access to training on Good Agronomic Practices (GAPs) significantly influenced farmers’ participation in outgrower schemes. The estimation based on the Heckman treatment effect two-stage model revealed that farmers who participated in outgrower schemes had significant higher amount of credit (GH₵379.2) compared with non-participants. The propensity score matching (PSM) results indicated no significant difference between average credit utilization of outgrower scheme participants and non-participants. Also, farmers identified low sales price of produce as their most important constraint in outgrower schemes. The study recommends that drivers of outgrower schemes should liaise with NGOs to acquire support for its members because it influences farmers’ participation in outgrower schemes.