Impact of Rural and Community Bank Credit Access on Technical Efficiency of Smallholder Cassava Farmers in Fanteakwa District of Ghana

Abstract

Cassava is an important staple food in Ghana, both in terms of quantity produced and quantity consumed. Increases in the output of the crop, in recent years, have been attributed to increases in land size rather than intensification. This situation has been blamed partially on the low use of improved inputs among smallholder farmers who dominate the country’s agriculture. The low use of improved inputs has been attributed to the persistent lack or limited access to credit among smallholder farmers. Rural and Community Banks (RCB) were established with the sole aim of enhancing rural entrepreneurs’ access to financial services, and particularly credit. It was envisaged this would improve farm productivity. However, there is little knowledge on what impact cassava farmers’ access to RCB credit has on their technical efficiency. The study sought to fill this gap in knowledge. A multistage sampling technique was employed in the selection of 300 smallholder cassava farm households in the Fanteakwa District in the Eastern Region of Ghana. A semi-structured questionnaire was used to collect primary data on farm level and socioeconomic characteristics of the farmers. Descriptive statistics and binary probit regression were employed to ascertain the factors influencing farmers’ awareness of credit facilities provided by RCBs in the district. A stochastic frontier model was used to estimate cassava farmers’ technical efficiency while the endogenous switching regression model evaluated the impact of farmers’ RCB credit access on their technical efficiency. The results show that half of smallholder cassava farmers in the district were aware of RCB credit facilities. Access to extension services, membership in farmer-based groups, land ownership, and saving with the bank were major determinants of farmer’s awareness of RCB credit programmes. Although the cassava farmers exhibited increasing returns-to-scale, they were technically inefficient operating 28.1 percent away from the efficient frontier. Gender, extension access, membership in farmer-based groups, reduces farmers’ technical inefficiency. The first stage of the endogenous switching regression revealed that gender, extension access, land ownership and off-farm income positively influenced farmers’ decision to access RCB credit. Overall, RCB credit access had a positive and significant impact on farmers’ technical efficiency among those who accessed it. The study recommends that RCBs in Ghana vamps up their efforts to make their programmes widely known to farmers in their catchment areas to enhance credit access. In addition, Ghana’s Ministry of Food and Agriculture should enhance the scope and mode of extension service delivery to increase farmers’ technical efficiency.