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Article
Publication date: 6 May 2021

Josephine Cherotich, Kenneth Waluse Sibiko and Oscar Ingasia Ayuya

Inadequate finance is considered a major factor limiting the growth of small-scale women-owned farm enterprises in Sub-Saharan Africa. Women empowerment programs such as…

Abstract

Purpose

Inadequate finance is considered a major factor limiting the growth of small-scale women-owned farm enterprises in Sub-Saharan Africa. Women empowerment programs such as table banking (TB) and women enterprise fund were initiated in an attempt to curb the credit gap affecting women in agribusiness. This paper determines the factors influencing the extent of credit access among women farm-entrepreneurs who are either members or nonmembers of TB groups in Kenya.

Design/methodology/approach

The study was conducted in Kericho County using a sample of 384 respondents. Factor analysis was used to generate three indicators of entrepreneurial orientation which were included as explanatory variables in the regressions. Double hurdle econometric model was employed to analyze the factors influencing the decisions on credit uptake and amount of borrowed loan. Separate models were estimated for members and nonmembers of TB groups since they differed in volume and source of loan accessed.

Findings

Results reveal that age of the woman and innovativeness negatively influenced credit access, whereas education level, participation in off-farm activities, number of farm enterprises, perception on interest rate, extension contacts and financial knowledge positively influenced the decision to access credit. On the other hand, participation in off-farm activities, risk-taking behavior, total land size, extension access and financial knowledge were statistically significant with positive correlation on the amount of loan borrowed. Significant factors differ between members and nonmembers of TB groups implying divergence in underlying credit access challenges once one has joined such groups.

Research limitations/implications

The study did not consider supply-side factors affecting the amount of loan accessed by women farm-entrepreneurs.

Originality/value

To the best of the authors’ knowledge, this paper is one of the pioneer studies using the double hurdle model to analyze factors influencing the extent of credit access specifically among women farm-entrepreneurs and carrying out the analysis by membership in TB groups.

Details

Agricultural Finance Review, vol. 82 no. 1
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 20 August 2020

Anthony Siaw, Yuansheng Jiang, Martinson Ankrah Twumasi, Wonder Agbenyo, Gideon Ntim-Amo, Frank Osei Danquah and Ernest Kwarko Ankrah

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.

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.

Details

Agricultural Finance Review, vol. 81 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 17 November 2020

Fredrick Onyango Odhiambo and Radha Upadhyaya

The purpose of this paper is to determine the level of flexibility in loan products offered to smallholder farmers in Siaya County in Kenya and to examine the effect of…

Abstract

Purpose

The purpose of this paper is to determine the level of flexibility in loan products offered to smallholder farmers in Siaya County in Kenya and to examine the effect of flexibility on access to credit.

Design/methodology/approach

The paper uses primary survey data from a sample of smallholder farmers in Siaya County in Kenya who had borrowed from various lending institutions within the study area. The paper develops an index variable of loan flexibility using multiple correspondence analysis (MCA) technique. The model is estimated using both OLS and truncated regression analyses. Access to credit is measured as the amount of loan borrowed by each farmer.

Findings

The authors find that the level of flexibility of loans offered to farmers is low. Furthermore, the authors find that the level of flexibility is not significantly correlated to access to credit. Further analysis using individual components of flexible loans show that refinancing and lines of credit are more likely to improve access to credit when farmers are more educated and wealthier, respectively. The age of a farmer, the type of lender, the type of loan, education and household wealth are the main determinants of access to credit.

Originality/value

The paper adds to the debate on access to credit by showing that theoretically, while loan flexibility should lead to higher credit access, this is not a key determinant of access to credit in this context.

Details

Agricultural Finance Review, vol. 81 no. 3
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 2 September 2019

Do Xuan Luan

The purpose of this paper is to explore the existence and determinants of the credit gap in the cinnamon value chain development in Northwestern Vietnam.

Abstract

Purpose

The purpose of this paper is to explore the existence and determinants of the credit gap in the cinnamon value chain development in Northwestern Vietnam.

Design/methodology/approach

A multi-stage sampling of 548 cinnamon households and a Heckman Selection Model were applied to examine their credit access constraints. In-depth interviews with cooperatives, enterprises, banks and relevant government agencies were further conducted to explain the credit gap.

Findings

In the total 52.74 percent of households that received credit, 24.56 percent of them received an insufficient amount of credit as registered. In addition, 35.77 percent of total households are credit rationed. Although all enterprises and cooperatives had been successful in applying for credit as long as they have collateral, none of them received the full credit amount requested. The credit amount received satisfied 80.64, 43.03 and 44.28 percent of the demand by households, cooperatives and enterprises, respectively. The lack of valuable collateral assets is the most important factor explaining this credit gap. Moreover, membership in a farmer-based union or ownership of a bank account increases the probability of access to credit. Educated household heads with a larger farm size and the Kinh ethnic majority are positively associated with a larger amount of credit. Households with conventional cinnamon farming, more dependents and union non-membership are more likely to be credit rationed.

Practical implications

A reform on collateral management, facilitating access to bank accounts, capacity building for local farmer-based unions, organic certification, granting land use rights and facilitating a platform to share reliable information between relevant actors are needed to bridge the credit gap.

Originality/value

This paper analyses the determinants of credit access constraints by key actors in a medicinal plant value chain that was insufficiently discussed by previous studies in the field.

Details

Agricultural Finance Review, vol. 79 no. 4
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 18 December 2019

Samuel Sekyi, Paul Bata Domanban and George Kwame Honya

The purpose of this paper is to examine the impact of informal credit access on agricultural productivity in rural Ghana.

Abstract

Purpose

The purpose of this paper is to examine the impact of informal credit access on agricultural productivity in rural Ghana.

Design/methodology/approach

Data sets from the Ghana Feed the Future baseline survey involving a total sample of 2,437 rural farm households were used. In order to address the problem of endogeneity and sample selectivity bias, the endogenous switching regression (ESR) model was employed to examine whether rural farm households’ with access to informal credit and those without access differ in terms of their productivity levels and whether access to informal credit affects agricultural productivity.

Findings

Estimates from the ESR show that access to informal credit significantly promotes agricultural productivity. Specifically, farmers with access to informal credit were able to achieve a yield of 48.42 kg/ha more than their counterparts without informal credit access. In terms of the counterfactual, farmers without informal credit access would have increased their yield by 57.61 kg/ha if they were to have access to informal credit.

Research limitations/implications

The study was restricted to the savannah ecological zone of Ghana. This limits the extent of generalisation of results.

Originality/value

This study provides a rigorous econometric analysis of the impacts of access to informal credit on agricultural productivity in rural Ghana. The study contributes to the current debate on the link between access to informal credit and agricultural productivity and provides valuable input for policymakers.

Details

African Journal of Economic and Management Studies, vol. 11 no. 2
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 4 May 2012

Pavel Ciaian, Jan Fałkowski and d'Artis Kancs

The purpose of this paper is to analyse how farm production and input use (land, variable inputs, labour, and capital) is related to farm access to credit in the Central…

Abstract

Purpose

The purpose of this paper is to analyse how farm production and input use (land, variable inputs, labour, and capital) is related to farm access to credit in the Central and Eastern Europe (CEE) transition countries.

Design/methodology/approach

Drawing on a unique farm level panel data set with 37,409 observations and employing a matching estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the CEE transition countries. The large size of the FADN data set has an additional advantage. It allows the authors to employ a semi‐parametric estimator based on the propensity score matching. Using more than 37,409 observations assures that the loss in efficiency of semi‐parametric estimates, as compared to parametric ones, is not a problem. This is important for at least two reasons. First, applying a semi‐parametric propensity score matching (PSM) estimator allows to control for any heterogeneity in the relationship between farm performance and their observable characteristics (in particular access to credit). Second, matching estimators are robust in situations where farms having access to credit systematically differ from those that do not.

Findings

It is found that farms are asymmetrically credit constrained between inputs. The use of variable inputs and capital investment increases up to 2.3 percent and 29 percent, respectively, per 1,000 EUR of additional credit. The authors' estimates suggest also that farm access to credit increases the total factor productivity up to 1.9 percent per 1,000 EUR of additional credit, indicating that an improved access to credit results in adjusting the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land.

Originality/value

To the best of the authors' knowledge, the present paper is the first to investigate the importance of access to credit for farm performance in the CEE region as a whole.

Details

Agricultural Finance Review, vol. 72 no. 1
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 4 July 2016

Abdul-Hanan Abdallah

The purpose of this paper is to examine the impact of agricultural credit on technical efficiency of Ghanaian maize farmers using a unique dataset drawn from the database…

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Abstract

Purpose

The purpose of this paper is to examine the impact of agricultural credit on technical efficiency of Ghanaian maize farmers using a unique dataset drawn from the database of Sub-Saharan Africa’s intensification of food crops agriculture (Afrint II) in 2008 period.

Design/methodology/approach

In this study, a two-stage estimation procedure is employed to determine impact of agricultural credit on technical efficiency of Ghanaian maize farmers. The first stage utilized probit model while the second stage utilized stochastic frontier approach to estimate impact of credit on technical efficiency of Ghanaian maize farmers.

Findings

The study found that farmers are producing below the frontier with average technical efficiency of 47 percent. Policy variables such as credit access; education, extension access and farm size played a stronger role in technical efficiency. Agricultural credit in particular increased technical efficiency by 3.8 percent.

Research limitations/implications

The results should not be extended to the impact of agricultural credit on economic efficiency since the allocative efficiency component is not considered in this study. Also, caution should be taken in the interpretation of these results because the data could not permit the incorporation of all variables that might affect technical efficiency.

Originality/value

The originality of the paper and its contribution to existing literature largely lies from the use of a unique dataset to find evidence of the impact of credit on efficiency in Ghana.

Details

Agricultural Finance Review, vol. 76 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 17 January 2020

Do Xuan Luan

The purpose of this paper is to investigate borrowing motivation, credit access barriers and their impacts on income of smallholder farmers engaging in cinnamon value…

Abstract

Purpose

The purpose of this paper is to investigate borrowing motivation, credit access barriers and their impacts on income of smallholder farmers engaging in cinnamon value chain development in Northwestern Vietnam.

Design/methodology/approach

A multistage sampling technique using a structural questionnaire and in-depth interviews was applied for collecting primary data from farmers and relevant stakeholders. The Propensity Score Matching was employed to analyze access barriers and examine whether relaxing these barriers can improve farmer income. To deal with the issue of model uncertainty and further increase the robustness of results, Bayesian model average and the bootstrapping approach were applied.

Findings

To fulfill the certain quality standards of cinnamon products which are later used in the medicinal and food industry, farmers as primary producers need credit for intensive investment to increase the value of their products. Still, there are 25.36 percent of farmers who have access constraints to formal credit. In the credit received group, 24.56 percent have not received full credit as demanded. Access problems are relevant to lack of collateral, lack of bank account holdings, inconvenient access to roads, weak chain linkage and limited organic farming. Removing credit access barriers can improve the income for farmers from cinnamon farming activities.

Research limitations/implications

More detailed information on the conditions under which credit serves a more important role in creating value addition for cinnamon products can help the government establish more effective credit policies.

Social implications

Great attention should be paid to smallholder farmers as primary producers in the chain for sustainable value chain development in developing and emerging economies. Policy interventions should facilitate access to bank accounts, speed up the process of granting residential land use certificates, certify organic farming and upgrade the road system. Strengthening the chain linkage can enhance smallholder farmers’ capacity to obtain credit through value chain lending development.

Originality/value

Empirical studies on agricultural credit from the perspective of value chain development remain scarce. A better understanding of credit access constraints allows for the positing of recommendations for policy makers to facilitate value chain lending and a medicinal plant-based agro-forestry system in similar situations.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 10 no. 2
Type: Research Article
ISSN: 2044-0839

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Article
Publication date: 6 November 2017

Samuel Sekyi, Benjamin Musah Abu and Paul Kwame Nkegbe

The purpose of this paper is to examine farmers’ access to credit, credit constraint, and productivity in the Northern Savannah ecological zone of Ghana.

Abstract

Purpose

The purpose of this paper is to examine farmers’ access to credit, credit constraint, and productivity in the Northern Savannah ecological zone of Ghana.

Design/methodology/approach

Secondary data from the Ghana Feed the Future baseline survey involving a total sample of 2,968 farm households were used. The conditional mixed process (CMP) framework was applied to estimate access to credit, credit constraint, and productivity simultaneously. As a system estimator the CMP corrects for possible heterogeneity and sample selection bias.

Findings

The results from the estimations revealed that age, literacy, farm non-mechanized equipment, and group membership were the variables influencing farmers’ access to credit. Credit constraint conditions were determined by household size, locality, group membership, and household durable assets. Finally, the results showed that productivity of farmers was dependent on marital status, household size, locality, farm size, commercialization, farm mechanized equipment, group membership, and household durable assets.

Originality/value

This paper is the first, to the best of the authors’ knowledge, to use the CMP framework to jointly estimate access to credit, credit constraint, and productivity. The results indicate that estimating credit access and constraint models separately would have yielded biased estimates. Thus, this paper informs future research on farmers’ credit access, credit constraint, and productivity for informed policymaking.

Details

Agricultural Finance Review, vol. 77 no. 4
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 20 January 2020

N’Banan Ouattara, Xiong Xueping, Trazié Bertrand Athanase Youan BI, Lacina Traoré, J.K. Ahiakpa and Odountan Ambaliou Olounlade

Several years after the regularization of microfinance activity in Côte d’Ivoire, smallholder farmers’ access to microfinance credits still remains marginal. The purpose…

Abstract

Purpose

Several years after the regularization of microfinance activity in Côte d’Ivoire, smallholder farmers’ access to microfinance credits still remains marginal. The purpose of this paper is to identify and analyze key determinants of access to microfinance credit in Sassandra-Marahoué District.

Design/methodology/approach

A total of 150 smallholder farmers were randomly sampled using an interview guide and semi-structured questionnaires. Univariate statistics and Probit binary modeling were employed for data analyses.

Findings

Results revealed that socio-economic/demographic characteristics of smallholder farmers and credit requirements imposed by microfinance institutions (MFIs) are key determinants of smallholder farmers’ access to microfinance credits in the district.

Research limitations/implications

Although, the authors shed light on the determinants of microfinance credit access for smallholder farmers in this district, the study focused on a single source of financial credit. Future research will need to explore the determinants of credit demand and the choice between different sources of rural credits in Côte d’Ivoire.

Practical implications

The findings suggest that MFIs seldom take into account smallholder farmers who are not engaged in off-farm income-generating activities and savings account; and those with low level of education. Sensitization programs on the importance of savings mobilization and credit policy by MFIs will potentially increase smallholder’s knowledge on credit access requirements and thereby increased access.

Originality/value

To the authors’ knowledge, this is the first study investigating determinants of smallholder farmers’ access to microfinance credits in Côte d’Ivoire specifically in the Sassandra-Marahoué District. The results of this study will serve as a guide for MFIs for improving smallholder farmers’ access to credit.

Details

Agricultural Finance Review, vol. 80 no. 3
Type: Research Article
ISSN: 0002-1466

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