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Financial inclusion and agricultural commercialization in Ghana: an empirical investigation

Financial inclusion and agricultural commercialization in Ghana: an empirical investigation PurposeThe purpose of this paper is to investigate the connections between financial inclusion and agricultural commercialization among farmers in Ghana.Design/methodology/approachIn order to address endogeneity and sample selectivity bias, the study employs endogenous switching regressions (ESRs) to examine whether financially included and financially excluded maize farm households differ in their commercialization behavior and whether financial inclusion affects commercialization. The Heckman Treatment Effect (HTE) model is used to test for robustness of the results. The data used contain a random sample of 2,230 maize farmers across the ten regions of Ghana.FindingsThe results from the ESRs show that financial inclusion significantly fosters agricultural commercialization. Specifically, financially included households sell 13.25 percent more output than their financially excluded counterparts. In terms of the counterfactual, financially excluded households would have sold 5.04 percent more output if they were to have access to financial services. Results from the HTE model confirm that financial inclusion promotes agricultural commercialization.Practical implicationsFinancial inclusion is low among maize farmers; this implies that there are more benefits to be gained by ensuring that farmers have access to a broad range of financial services.Social implicationsThe findings imply that the quest for the integration of smallholder farmers into markets cannot overlook measures to ensure financial inclusion.Originality/valueIt represents the first attempt at linking financial inclusion to agricultural commercialization using econometric methodology. The study serves as a foundation paper and for that matter will serve as a guide to future research on the financial inclusion-agricultural commercialization nexus. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Financial inclusion and agricultural commercialization in Ghana: an empirical investigation

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-1466
DOI
10.1108/AFR-02-2017-0007
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to investigate the connections between financial inclusion and agricultural commercialization among farmers in Ghana.Design/methodology/approachIn order to address endogeneity and sample selectivity bias, the study employs endogenous switching regressions (ESRs) to examine whether financially included and financially excluded maize farm households differ in their commercialization behavior and whether financial inclusion affects commercialization. The Heckman Treatment Effect (HTE) model is used to test for robustness of the results. The data used contain a random sample of 2,230 maize farmers across the ten regions of Ghana.FindingsThe results from the ESRs show that financial inclusion significantly fosters agricultural commercialization. Specifically, financially included households sell 13.25 percent more output than their financially excluded counterparts. In terms of the counterfactual, financially excluded households would have sold 5.04 percent more output if they were to have access to financial services. Results from the HTE model confirm that financial inclusion promotes agricultural commercialization.Practical implicationsFinancial inclusion is low among maize farmers; this implies that there are more benefits to be gained by ensuring that farmers have access to a broad range of financial services.Social implicationsThe findings imply that the quest for the integration of smallholder farmers into markets cannot overlook measures to ensure financial inclusion.Originality/valueIt represents the first attempt at linking financial inclusion to agricultural commercialization using econometric methodology. The study serves as a foundation paper and for that matter will serve as a guide to future research on the financial inclusion-agricultural commercialization nexus.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: Nov 6, 2017

References