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Agricultural credit provision: what really determines farmers’ participation and credit rationing?

Collins Asante-Addo (Ghana Strategy Support Program, International Food Policy Research Institute, Accra, Ghana)
Jonathan Mockshell (Department of Agricultural Economics and Social Sciences in the Tropics and Subtropics, University of Hohenheim, Sttutgart, Germany) (Deutsches Institut fur Entwicklungspolitik, Bonn, Germany)
Manfred Zeller (Department of Rural Development Theory and Policy, University of Hohenheim, Stuttgart, Germany)
Khalid Siddig (Department of International Agricultural Trade and Development, Humboldt-Universitat zu Berlin, Berlin, Germany)
Irene S. Egyir (Department of Agricultural Economics and Agribusiness, University of Ghana, Accra, Ghana)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 3 July 2017




The purpose of this paper is to analyze determinants of farmers’ participation and credit rationing in microcredit programs using survey data from Ghana.


The authors use the Garrett Ranking Technique to analyze farmers’ reasons for participation or non-participation in credit programs, a probit regression model to estimate factors influencing farm households’ participation, and the Heckman’s sample selection model to identify factors influencing farm households’ probability of being credit rationed by microcredit programs.


The results reveal that farm households participate in credit programs because of improved access to savings services and agricultural loans. Fear of loan default and lack of savings are reasons for non-participation in credit programs. Furthermore, membership in farmer-based organizations (FBOs) and the household head’s formal education are positively associated with farmers’ participation in credit programs. The likelihood of farmers being credit rationed (i.e. their loan applications were either rejected or the amount of credit they applied for was reduced) is less likely among higher income farmers and members of FBOs such as farmer cooperatives and savings clubs.

Practical implications

The findings suggest that policy strategies aiming to improve access to savings and credit services should educate farmers and strengthen FBOs that could serve as entry points for financial service providers. Such market smart strategies have the potential to improve farmers’ access to financial services and reduce rural poverty.


Although existing studies have examined farmers’ participation in credit markets and credit rationing separately, the unique contribution of this paper is the analysis of participation in microcredit programs as well as the likelihood of farmers being credit rationed in Ghana.



The authors would like to thank the German Academic Exchange Services (DAAD) for its financial support of this study through its “Development Professional” program. The authors are thankful to the many farmers who participated in the survey for providing useful information. Furthermore, the authors would like to thank Dr Thea Nielsen for editing the paper and providing useful comments on earlier versions of the paper. The authors also thank the anonymous reviewers and Dr Calum Turvey (Editor, Agricultural Finance Review) for useful comments, which led to improvements in the paper. The contents of the paper are the responsibility of the authors and do not necessarily reflect the views of the organizations involved in the work.


Asante-Addo, C., Mockshell, J., Zeller, M., Siddig, K. and Egyir, I.S. (2017), "Agricultural credit provision: what really determines farmers’ participation and credit rationing?", Agricultural Finance Review, Vol. 77 No. 2, pp. 239-256.



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Copyright © 2017, Emerald Publishing Limited

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