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The impact of credit on the technical efficiency of maize-producing households in Northern Ghana

The impact of credit on the technical efficiency of maize-producing households in Northern Ghana Production credit is essential for enhancing the technical efficiency (TE) and the welfare of smallholder farmers in Africa. The purpose of this paper is to examine the impact of credit on smallholders’ TE using cross-sectional data from 223 maize-producing households in Northern Ghana.Design/methodology/approachDue to the exogenous assignment of credit and assumption of homogeneity in farm technologies, the propensity score matching (PSM) analysis was used to compare the average difference in TE between farmers that had received credit and those that had not.FindingsThe results revealed that production credit impacts positively on smallholder farmers’ TE. Access to production credit is significantly influenced by access to markets and extension services, distance to market, asset index and land fragmentation. The provision of credit enhances the timely purchase and efficient allocation of farming inputs to produce the maximum possible output. Per capita income and land fragmentation also play important roles in reducing smallholders’ TE.Practical implicationsTo increase efficiency gains, credit programs for agricultural interventions should target resource-poor smallholder farmers. The efficiency gains can be sustained through stronger partnerships with financial institutions. Policy interventions aimed at increasing smallholder farmers’ access to production credit (e.g. through the creation of a conducive investment environment that lowers the lending rate and collateral requirements) must be vigorously pursued.Originality/valueTo the best of authors’ knowledge, this is one of the only recent studies to examine the impact of credit on the TE of farming households by applying the translog stochastic frontier production function and the PSM approaches. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

The impact of credit on the technical efficiency of maize-producing households in Northern Ghana

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References (69)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0002-1466
DOI
10.1108/afr-05-2018-0041
Publisher site
See Article on Publisher Site

Abstract

Production credit is essential for enhancing the technical efficiency (TE) and the welfare of smallholder farmers in Africa. The purpose of this paper is to examine the impact of credit on smallholders’ TE using cross-sectional data from 223 maize-producing households in Northern Ghana.Design/methodology/approachDue to the exogenous assignment of credit and assumption of homogeneity in farm technologies, the propensity score matching (PSM) analysis was used to compare the average difference in TE between farmers that had received credit and those that had not.FindingsThe results revealed that production credit impacts positively on smallholder farmers’ TE. Access to production credit is significantly influenced by access to markets and extension services, distance to market, asset index and land fragmentation. The provision of credit enhances the timely purchase and efficient allocation of farming inputs to produce the maximum possible output. Per capita income and land fragmentation also play important roles in reducing smallholders’ TE.Practical implicationsTo increase efficiency gains, credit programs for agricultural interventions should target resource-poor smallholder farmers. The efficiency gains can be sustained through stronger partnerships with financial institutions. Policy interventions aimed at increasing smallholder farmers’ access to production credit (e.g. through the creation of a conducive investment environment that lowers the lending rate and collateral requirements) must be vigorously pursued.Originality/valueTo the best of authors’ knowledge, this is one of the only recent studies to examine the impact of credit on the TE of farming households by applying the translog stochastic frontier production function and the PSM approaches.

Journal

Agricultural Finance Review – Emerald Publishing

Published: Jun 10, 2019

Keywords: Agriculture; Credit; Propensity score matching; Technical efficiency; Smallholder farmers

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