The ripple effect of credit accessibility on the technical efficiency of maize farmers in Ghana

Abstract

Purpose

The purpose of this study is to examine the impact of access to credit on technical efficiency (TE) of maize farmers in a developing country, Ghana.

Design/methodology/approach

The study employed an instrumental variable approach and the stochastic frontier analysis (SFA) method for the estimation of the results.

Findings

The study found that farmers who have access to agricultural credit stand the chance of increasing TE by a margin of 8%, which also influences the maize production than those who did not have access to credit. The average TE score of the farmers was 74%. The study also found out that factors like membership, gender, farmers' access to credit, age and social network determine farmers' possibility of accessing agricultural credit. The study finds out that returns to size are increasing among the maize farmers and that significant improvement in efficiency can be realized by increasing the level of input used in production. Also, factors such as farm size, labor, seeds and fertilizer are the essential determinants of maize production output. Also, gender, extension, age, off-farm income, access to credit and membership were significant factors influencing technical inefficiency (TI).

Originality/value

The paper contributes to the existing literature on agricultural credit on rural agricultural development. The problem of endogeneity associated with access to credit, which has been considered by other researchers, is dealt with this study. This paper also provides information to government policymakers, practitioners and all other stakeholders in the maize sub-sectors and also will benefit small farmers outside the study area.

Citation

Siaw, A., Jiang, Y., Ankrah Twumasi, M., Agbenyo, W., Ntim-Amo, G., Osei Danquah, F. and Ankrah, E.K. (2021), "The ripple effect of credit accessibility on the technical efficiency of maize farmers in Ghana", Agricultural Finance Review, Vol. 81 No. 2, pp. 189-203. https://doi.org/10.1108/AFR-05-2020-0068