AGRICULTURAL VALUE CHAIN PARTICIPATION AND ITS EFFECTS ON CREDIT ACCESS, LOAN REPAYMENT AND FARMERS’ INCOME IN NORTHERN GHANA

Abstract

Despite the importance of credit in enhancing productivity and livelihoods, farmers continue to complain about lack of access to adequate credit for agricultural production. The main objective of this study was to examine the effects of agricultural value chain (AVC) participation on credit access, loan repayment and farmers’ income in Northern Ghana. Also, the interrelationships between AVC vertical linkage (AVC-VL) and AVC horizontal linkage (AVC-HL) and that of AVC participation and farmers’ access to formal and informal credits were assessed. Data processing and analysis were done in STATA version 15 and NLOGIT version 6 using the Heckman Treatment Effect model, Multivariate Probit model with sample selection and Bivariate Probit model respectively. Through a Multi-stage sampling approach, cross sectional data was collected from 500 farmers by face to face interviews using semi structured questionnaires. The results revealed that awareness of AVC, extension contact and networking significantly increased farmers’ participation in AVC (AVC VL and AVC-HL). Most interestingly, participation in AVC-VL complements with AVC-HL participation while access to informal credit substitutes for formal credit. The results also revealed that participating in AVC significantly increased farmers’ access to bigger size credit, crop income and loan repayment. The study recommends that policies on agricultural financing, farmers’ livelihood as well as funds to the sector should be directed through AVC and farmers should be encouraged to participate in it. The study has contributed to empirical literature in that it extended the MVP model with one selection variable (as developed by Greene (2010)) to two selection variables to address unobserved heterogeneity and interrelationships between farmers’ access to formal and informal credits and participation in AVC-VL and AVC-HL.