Agricultural Finance Review

Farm credit access, credit constraint and productivity in Ghana: empirical evidence from northern
savannah ecological zone
Samuel Sekyi, Benjamin Musah Abu, Paul Kwame Nkegbe,
Article information:
To cite this document:
Samuel Sekyi, Benjamin Musah Abu, Paul Kwame Nkegbe, "Farm credit access, credit constraint and productivity in
Ghana: empirical evidence from northern savannah ecological zone", Agricultural Finance Review, https://doi.org/10.1108/
AFR-10-2016-0078
Permanent link to this document:
https://doi.org/10.1108/AFR-10-2016-0078
Downloaded on: 23 September 2017, At: 11:35 (PT)
References: this document contains references to 0 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 2 times since 2017*
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Access to this document was granted through an Emerald subscription provided by emerald-srm:573577 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please
visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication
Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

*Related content and download information correct at time of download.

 Farm credit access, credit constraint and productivity in Ghana: empirical evidence
from northern savannah ecological zone
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 Ghana Feed the Future (FtF) 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 CMP corrects for possible heterogeneity
and sample selection bias.
Findings – The results from the estimations revealed that age, literacy, farm non-mechanised
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

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
mechanised equipment, group membership, and household durable assets.
Originality/value – This paper is the first, to the best of our knowledge, to use Conditional
Mixed Process (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.
Keywords: Credit access, Credit constraint, Productivity, Conditional mixed process, Ghana
Paper type: Research paper
JEL Classification: Q11, Q12, Q14

1. Introduction
History of economic development in other parts of the world indicates that growth in
agricultural productivity has been the major source of sustained improvements in rural
household welfare (Mellor, 1990). Agriculture continues to be the mainstay of most
developing countries in Africa with majority of the people farming at subsistent level with
very low incomes. Likewise in Ghana, the poor are mostly found in rural areas and
agriculture forms the backbone of these areas. According to Ghana’s Ministry of Food and
Agriculture, approximately 13.6 million hectares of land which constitutes 57 percent of the
total land area of Ghana is suitable for agricultural purposes (MoFA, 2011).
Agriculture is a key sector of Ghana’s economy, contributing 23 percent to Gross Domestic
Product (GDP) in 2012 and employing almost half of the national labour force. The sector
has also seen significant growth since 2007, benefiting from high international prices,
particularly from its main exports such as cocoa (WTO, 2014). Despite this growth,
agriculture remains largely rain-fed and subsistence-based, with rudimentary technology such
as “cutlass and hoe” used to produce 80 percent of total output (FAO, 2015). Agriculture is

1
 predominantly on a smallholder basis with about 90 percent of farm holdings being less than
2 hectares (MoFA, 2011). Ghana’s principal agricultural produce include industrial crops
(cocoa, oil palm, coconut, coffee, cotton, kola, rubber), starchy and cereal staples (cassava,
cocoyam, yam, maize, rice, millet, sorghum, plantain) and fruits and vegetables (pineapple,
citrus, banana, cashew, pawpaw, mangoes, tomato, pepper, okro, eggplant, onion, Asian
vegetables). Production of food crops has increased in recent years. However, this sector is
still characterized by low productivity. Ghana continues to be net importer of agricultural
products, importing mainly consumer-ready commodities such as rice, wheat, sugar and
poultry (USDA Grain Report, 2012).

Total public expenditure (including administrative costs) allocated to the food and agriculture
sector as indicated by Monitoring and Analysing Food and Agricultural Policies (MAFAP)
fluctuated between 3 percent and 5 percent from 2006 to 2012 (FAO, 2014). Even though
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

overall spending has increased, this has not resulted in the expected sustainable growth rate
of 6 percent in agricultural GDP, in accordance with Maputo Declaration Target which rallied
African governments to increase spending in the agricultural sector to stimulate agricultural
growth, reduce poverty, and build food and nutrition security.
Notwithstanding the contribution of agriculture to the national economy, the incidence of
poverty among food crop farmers is reported to be high. The Ghana Living Standards Survey
Round 6 reports that rural agricultural workers form the poorest in Ghana (Ghana Statistical
Service, 2014). A number of factors have contributed to this poor state of affairs and have
made agribusiness unable to achieve its full potentials. Some of these factors are poor market
accessibility, weak infrastructure (e.g., roads, storage facilities, etc.), limited ability to
influence government policy and inadequate credit (Quartey et al., 2012).
To address the issue of poverty in Ghana, and particularly in the northern regions, as
envisaged in the Ghana Poverty Reduction Strategy paper and the Ghana Shared Growth and
Development Agenda, it is essential that constraints besetting the agriculture sector are
addressed. One of such constraints often mentioned is the limited access to agricultural
finance or credit.

The importance of credit in agricultural production systems cannot be underestimated. Some

researchers have argued that providing rural farmers with credit will increase output and
productivity. Credit allows producers to satisfy the cash needs caused by the production cycle
of land preparation, planting, cultivation and harvesting of crops, typically done over a period
of several months with very little cash revenue earned (Feder, 1990). Access to credit
potentially ensures technology adoption, increased agricultural production and enhances food
security (Duong and Izumida, 2002; Lawal et al., 2009). Hussain and Thapa (2015) assert
that one of the major challenges facing smallholder farmers especially those in developing
countries in their day-to-day farming activities is access to credit. Similar studies by Foltz
(2004) and Akudugu et al. (2012) reveal that in the face of credit constraint farmers’ use and
adoption of improved inputs are affected which in turn adversely affect farm profit and
investment. The availability of credit allows for use of improved inputs and thus has the
potential to increase production and welfare of smallholder farmers. However, the lack of

2
 credit for smallholder farmers is an entrenched issue and that limits the development of the
agriculture sector.

Smallholder farmers often face limited access to credit from both formal and informal credit
institutions reducing their ability to finance their businesses. Access to rural credit is
constrained by several factors, including the lack of collateral in the form of property and
stable employment. Some reasons given for low levels of investment in agriculture include a
history of default on subsidized loans, issues of land tenure, weather risks, and a lack of
technical knowledge on risk assessment and management (FAO, 2015).
Recognizing the critical role credit plays in alleviating rural poverty in a more sustainable
way, innovative credit delivery systems have been promoted. For instance, to increase access
to agricultural finance, the government of Ghana established the Agricultural Development
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Bank (ADB) in 1965 with an exclusive mandate of lending to agriculture and allied industries
in rural areas at reduced lending rates. Despite efforts by government and development
partners among others to overcome the inadequate access to agricultural finance among
smallholder farmers, especially those in the northern savannah ecological zone in Ghana,
majority of these farmers are still credit constrained. The northern savannah ecological zone
comprises the three northern regions of Ghana, namely, Upper East, Upper West and the
Northern Region, and stretches to include districts contiguous to the Northern region that are
located north of Brong Ahafo region. It is against this background that this paper aims at
enhancing our understanding on credit access, credit constraint and productivity in the study
area. This study has three-fold objectives: first, to determine the factors influencing credit
access; secondly, to estimate factors influencing credit constraint condition of farmers; and
finally, to estimate the determinants of farm productivity. This study attempts to build on
previous studies by modelling credit access, credit constraint condition and farm productivity
simultaneously.

The rest of the paper is organized as follows: the next section reviews literature relating to the
subject of study. This is immediately followed by section three on methodology while section
four presents the results. The final section contains the conclusions.

2. Review of related literature

Baker and Hopkins (1979) made a distinction of credit from loan. They refer to credit as an
asset or a financial reserve which can be used to exchange for a loan. This implies that for
farmers to get loan they need to have a security which in itself is credit. Olajide (1981) refers
to credit as “monetary” or financial aspect of capital resource (i.e., goods employed but used
up in the production process). Other authors (e.g., Abba et al., 2015) refer to credit as the
process of having authority over the use of money, goods and services or a tool for ensuring
the transfer of purchasing power from an individual or organization to another, though
temporarily, with a promise to repay at a future date. Broadly speaking, credit could denote
cash or non-cash item used for the purchase of goods and services with a promise to repay at
a future date. Kuwornu et al. (2012) refer to credit in the form of cash as the one which
farmers access from recognized financial institutions and other moneylenders while non-cash
credit is what farmers access in the form of inputs which are normally supplied by either

3
 individual entrepreneurs or businessmen among others, for which payments are made after
harvesting. Therefore, credit is considered both as in-cash and in-kind in this study.

The credit market in developing economies, especially in Africa, is usually characterised by

market failure (see, for example, Atieno, 2001; Seck, 2014). Stiglitz and Weiss (1981) were
the first to apply market failure literature first developed by Akerlof (1970) to the study of the
credit market. They noted that credit market failure manifests itself through adverse selection
and moral hazard and then leads to screening and sorting of potential borrowers. It is this
sorting and screening behaviour of financial institutions that explains why some farmers
secure credit and others do not. Further, this same behaviour dictates why some receive credit
amount sufficient to meet their utility (credit unconstraint farmers) while others receive
insufficient amounts (credit constraint farmers). According to Hussein and Ohlmer (2008), an
individual is credit constrained where the individual cannot avail itself of the credit it desires
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

at the prevailing relevant market conditions. Market imperfections, institutional and

individual or household-related factors may constrain access to credit markets. Inefficiencies
or imperfections in credit markets in developing countries are usually caused by interest rate
ceilings by government, monopoly power, large transaction costs, and moral hazard problems
(Bell et al., 1997; Carter, 1988). These market imperfections combine to ration farmers out of
the credit market.

The economic theory of productivity measurement dates back to the work of Tinbergen
(1942) and independently to Solow (1957). These authors developed productivity measures in
a production function context and linked them to economic growth analysis. These
pioneering studies have stimulated considerable development in productivity measurement.
In recent times productivity measurements integrate the theory of the firm, index number
theory and national accounts. The literature differentiates two productivity measurements in
agriculture: partial and total measures. Partial measurement considers the amount of output
per unit of a particular input. The most widely used partial measures are yield (output per unit
of land) and labour productivity (output per economically active labour or per agricultural
person-hour). The use of partial measures could be misleading as there is no clear cut
indicator on why they change. For instance, land and labour productivity may increase as a
result of increased use of tractor, fertilizer, output mix, among others. To account for at least
some of these difficulties a total productivity measure known as Total Factor Productivity
(TFP) was developed. TFP is the ratio of an index of agricultural output to an index of
agricultural inputs (Zepeda, 2001). This study used output per hectare as a measure of
agricultural productivity mainly due to non-availability of information in the dataset to
warrant the use of TFP.
Determinants of households’ credit access, credit constraint conditions and productivity have
been explored extensively in the literature. A cursory examination of existing studies reveals
that each of these studies differs in its underlying objective, model(s) and variables used.
Some previous studies examined only determinants of access to credit. For instance,
Akudugu et al. (2009), Etonihu et al. (2013), Dabone et al. (2014) and Denkyirah et al.
(2016) investigated factors influencing access to credit. Another branch of literature links
credit to some key variables. For example, Abdallah (2016) investigated the impact

4
 agricultural credit on technical efficiency while Akudugu (2016) and Awotide et al. (2015)
examined the impact of access to credit on agricultural productivity.

For specific empirical models applied to credit access, logit and probit models are the widely
used econometric approaches. For example, Akudugu et al. (2009) and Awunyo-Vitor et al.
(2014) employed the logit model while Dabone et al. (2014), Weber and Musshoff (2012)
and Abdallah (2016) used probit model to investigate determinants of credit access. Models
applied to studies linking credit access and other key economic variables (e.g., productivity)
include endogenous switching regression (e.g., Awotide et al., 2015), hierarchical
competitive model (e.g., Akudugu, 2016). In terms of empirical evidence, the credit literature
mostly concentrates on estimating socioeconomic (e.g., age, literacy, income, farm size and
group membership), technical (e.g., savings level) and institutional (e.g., interest rate,
distance to credit facility and collateral) factors that determine credit access (see, for
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

example, Akudugu et al., 2009; Awunyo-Vitor et al., 2014; Dabone et al., 2014; Weber and
Musshoff, 2012; Abdallah, 2016).

Akudugu (2016) using a hierarchical competitive model found that there is significant
relationship between credit from formal and informal sources on agricultural productivity.
Awotide et al. (2015) estimates at the second stage revealed that total livestock unit and farm
size were negative and statistically significant in explaining the variations in cassava
productivity among farmers who had access to credit, while household size, farm size, and
access to information assets were negative and statistically significant in explaining the
variation in cassava productivity among farmers without credit access.
The credit constraint literature usually links credit constraints to key economic variables. For
example, credit constraints and productivity (e.g., Boucher et al., 2006; Woutersen and
Khandker, 2013; Ali et al., 2014), credit constraints and efficiency (e.g., Omonona et al.,
2008), credit constraints and profitability (e.g., Oyedele et al., 2009), credit constraints and
welfare (e.g., Baiyegunhi et al., 2010), and credit constraints and agricultural productivity
(e.g., Ali et al., 2014). The constraint studies, just like the credit access, rely on categorical
models for estimations and use socioeconomic, technical and institutional characteristics as
predictors (see, for example, Omonona et al., 2008; Oyedele et al., 2009; Baiyegunhi et al.,
2010). In addition to the use of categorical models, some studies (see, Oyedele et al., 2009;
Baiyegunhi et al., 2010; Ali et al., 2014) use switching regression model to link credit
constraint conditions and other variables such as profitability of agricultural production,
farmers’ welfare and agricultural productivity and rural nonfarm participation.
Empirical studies on determinants of productivity are varied. The most discussed determinant
of productivity is farm size or land holding. Mazumdar (1965) observed that increasing land
holding of a farm decreases productivity. This view has been supported by recent studies. For
example, Kimhi (2003) and Larson et al. (2012) have found an inverse relationship between
farm size and productivity. However, Rao and Chotigeat (1981) did not find a systematic
relationship between the measures of productivity and land size. Further, the results indicated
that while capital had a positive effect on productivity, labour had a negative effect on
productivity. Wiebe et al. (2001) observed that education of rural labour force and
agricultural research are key to boosting future prospects for productivity growth in sub-

5
 Saharan Africa. Owuor (2000) using partial factor productivity measurement observed that
determinants of family labour productivity are consistent with those of land productivity in
Kenya.

Econometric models usually used in productivity studies rely on estimating production

functions. In this regard, Ekbom (1998) and Valerio (2014) used a Cobb-Douglas production
function to study determinants of agricultural productivity. In line with the findings of
Mazumdar (1965), Kimhi (2003) and Larson et al. (2012), Ekbom (1998) observed that farm
size negatively influenced farm performance and productivity while technical characteristics
such as labour availability, costs of production inputs and soil conservation quality impacted
productivity positively. Valerio (2014) confirmed the importance of land in productivity by
observing that land is an important resource in increasing rice productivity in Philippines.
However, he noted that capital is more important in explaining rice productivity increases
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

than land. Thus, Valerio (2014) contradicts the findings that land holding is a negative
determinant of productivity.

One fundamental issue that emerges from the literature on credit access, credit constraint and
productivity is the fact that no attempt, to the best of our knowledge, has been made to model
these three thematic areas in a systematic manner. Few studies link credit access and
production constraints (e.g., Denkyirah et al., 2016) and credit access and agricultural
productivity (e.g., Awotide et al., 2015). It is important to explore how these three areas
interact when they are considered as a system. The study thus attempts to fill this gap in the
body of literature by jointly modelling credit access, credit constraint and productivity,
thereby, making a methodological contribution.

3. Methodology
3.1 Data
Data used for this study come from the USAID Ghana Feed the Future (FtF) baseline survey
dataset in which 4,410 households were interviewed. The FtF programme started in Ghana in
mid-2011 and covered the three northernmost regions of Ghana, namely, Upper West, Upper
East, and Northern, as well as some selected areas in Brong Ahafo Region. The selection of
these areas by USAID/Ghana is based on national estimates that indicate that the incidence of
poverty, malnutrition, and stunting among children less than five years of age is
disproportionately high. Therefore, by focusing on these areas, the programme seeks to
achieve significant impact as compared to targeting the entire country.

The primary objective of the survey was to provide baseline data on the prevalence of
poverty, per capita expenditure, nutritional status, women's empowerment, household hunger,
dietary diversity and infant and young child feeding behaviours. To achieve this, data were
collected on the following key components: household demographic information, dwelling
characteristics, consumption expenditure, food security, women's dietary diversity, women
and children anthropometry, information on cultivation of key crops, access to credit, access
to productive capital, decision making, among others.

6
 The survey was carried out by the Monitoring Evaluation and Technical Support Services
(METSS) in collaboration with Kansas State University, University of Cape Coast, the
Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana,
and the Ghana Statistical Service.

3.2 Empirical model

Three structural models are considered in this study: access to credit model, credit constraint
model and productivity model. Access to credit and credit constraint models are discrete
models; a farmer either has access to credit or not and is credit constrained or not. The
productivity model is a continuous model measured as output per hectare. Analytically, it is
possible to model these structural models as standalone (i.e. using single equation estimation
techniques); credit access and credit constraint models can be estimated through categorical
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

choice models (probit or logit) while ordinary least squares can be used for the productivity
model. However, this study proposed to model these using a systems approach. A major
advantage of system estimation is that it uses more information thereby leading to more
precise parameter estimates. In this case, the appropriate econometric procedure is the
Conditional Mixed Process (CMP) model proposed by Roodman (2011)[1]. The CMP is
primarily built as a seemingly unrelated regression (SUR) model and thus permits building
different models and mixing them in a multi-equation fashion (Roodman, 2011). CMP
employs the maximum likelihood estimation technique. The underlying assumption of the
CMP framework is the joint modelling of two or more equations and allowing for cross-
equation correlation of the error terms. This justifies its use in this study. A SUR model of
credit access (
 ), credit constraint (
 ) and productivity (
 ) in the spirit of the CMP is
specified as follows:

∗ =  +  (1)

∗ =  +  (2)

∗ =  +  (3)
 =  X,  =  X,  =  X
y = g
∗  = 1
∗ > 0, 1
∗ > 0,
∗  (4)
 =   ,  ,   ~0, Σ
1  
Σ=  1  
  

Let’s assume
= 0, 0,
  is observed, then the likelihood function can be specified as:

*+ *+
!  , ,  , Σ;
|$  = %*-. %*-, &'   , ,
 −    ; Σ)  )  (5)

According to Roodman (2011), this function is impossible to directly estimate using standard
functions in statistical software. To directly estimate, we have to factor &'   ,  ,
 −
 ; Σ into probability distribution functions,  ,  |  and  [2]. The formula for the
conditional distribution of a normal distribution leads to the factoring:
1 1.2 12. 1 1,2 12,
&'   ,  ,  ; Σ = /& 0  − 1.2 ; 1 − 122
3 & 0  − 1,2 ; 1 − 122
34 
 −   ;   (6)
22 22

7
 Substituting this into equation (5) yields:

*+ *+
!  ,
|$  = %*-. %*-, /&1 5 
 −   ; 1 −
13 13 31
,  , Σ; 1 −
33 33
7 &2 5 2 −


 −   ; 1 − 7 )  )  4 &
 −   ; 33 
23 23 32
33 33

*+ *+
= &
 −   ; 33  %*-. %*-, &1 5 
 −   ; 1 − 
 −   ; 1 −
13 13 31 23
1 −
33 33
7 &2 5 2 −
33
23 32
33
7 ) ) 

= &
 −   ; 33  /Φ1 5− − 13 
 −   ; 1 − 7 Φ2 5− − 23 
 −   ; 1 −

 13 31 
33 33 33
23 32
74
33
(7)
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Equation (7), which is a product of one-dimensional normal probability density and a two-
dimensional cumulative normal density, can now be directly estimated using standard
statistical software.
Based on the foregoing, the empirical specifications of the three models are:

:; = <= + < > + ? (8)

;@A = = + > + ? (9)

BCD = E= + E > + ? (10)

where :;, ;@A and BCD are credit access, credit constraint and productivity respectively; >
is the set of variables hypothesized to influence :;, ;@A and BCD; ? , ? and ? are the
respective error terms. The variables used in the models are presented in Table I.

[Table I about here]

4. Results
Table II presents summary statistics of all the variables used for the analysis. Highlights of
the descriptive statistics indicate that out of the 2,968 farm households used for the analysis,
897 had access to credit representing 30.6%. Of those who accessed credit, about 85% were
credit constrained. The mean productivity was 606.80 kg per hectare. About 88% of farm
households are male-headed.
[Table II about here]

The average age of farmers is approximately 44 years. Mean household size is 6 people. Only
17% of the farmers in the study area are literate. This is understandable because majority of
people living in the study area have not had formal education. This observation is in line with
statistics from the Ghana Statistical Service that show that 62.5% of the population in the
northern region, for example, are not literate in any language (GSS, 2013). Again,
approximately 85% of the farmers are married, and 82% of them reside in the rural areas. The
8
 mean farm size is about 2 hectares indicating that the farmers are smallholders. Only 3% have
access to farm mechanized equipment (e.g., tractor, sheller) and this shows that farmers in the
study area continue to use rudimentary technology such as “cutlass and hoe”. About 91% of
farmers have farm non-mechanized equipment (e.g., cutlass, hoe). The mean monthly
household expenditure is GHS 468.20[3] which is equivalent to US$306.01.

The results on the determinants of access to credit, credit constraint and productivity are
presented in Table III.
[Table III about here]

In the appendix, Table AI presents the estimation results for a baseline specification where
access to credit, credit constraint and productivity are estimated as single models without
controlling for selection bias. It is generally observed that the single equations estimates are
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

underestimated which shows downward bias when compared to the CMP joint estimates. As
a result, the discussion here is based on only the CMP joint estimates. The relationship
between the three models as measured by the rho parameters is significant only for credit
access and credit constraint. This implies that estimating credit access and constraint models
separately is likely to yield results that are both biased and inconsistent. Thus, the CMP
estimates are superior to the univariate probit models.

Determinants of credit access, credit constraint and productivity are shown in columns 2, 4
and 6 respectively in Table III. The model fits the data reasonably well as indicated by the
likelihood-ratio (LR) test which is statistically significant at 1% level. In the credit access
model, age, literacy, farm non-mechanized equipment and group membership are the
significant determinants. All these variables show expected signs. In the credit constraint
model, household size, locality, group membership and household durable assets are
statistically significant. All these, except locality, show signs that meet the a priori
expectations. Finally, for the productivity model, marital status, household size, locality, farm
size, commercialization, farm mechanized equipment, group membership and household
durable assets are the significant determinants. Group membership is the only variable that
simultaneously influences credit access, credit constraint and productivity.
Age significantly influences only credit access. The results indicate that increasing age
reduces the probability of credit access. This corroborates the findings of Kuwornu et al.
(2012) who reported that financial institutions are often reluctant to lend money to old people
for fear that they may not live long enough to pay back the loan. Aside this argument, it could
be argued that older farmers might be less productive and hence considered as high risk
clients by financial institutions than their younger counterparts.
Marital status is only a significant positive determinant of productivity. The coefficient is
significant at 5% and indicates that married farmers are more productive than unmarried
farmers. Married farmers obtain just over 67 kg per hectare more than their single
counterparts. Joint farming of married couple might be responsible for this observation.
Usually, married farmers work as partners in production and can even practise division of
labour especially in the apportionment of productive hours between on-farm and off-farm
activities including attending social functions.
9
 The results also reveal that literate farmers are more likely to access credit. The marginal
effect suggests that if illiterate farmers were to be literate their probability of accessing credit
will increase by 8 percentage points. Plausible explanation for this finding is that literate
farmers are able to assimilate credit information, gather knowledge and have better
understanding of borrowing dynamics. Literacy improves farmers’ ability to conceptualize
credit information and enable them make viable economic decisions. This finding is
consistent with Ozowa (1995) and also Etonihu et al. (2013) who reported that literate and/or
educated farmers are more likely to understand the benefits of credit in modern production,
comprehend extension information on credit sources and credit usage.

Household size determines both credit constraint and productivity. In the case of credit
constraint, it is significant at 5% and indicates that increasing size of the household increases
the probability of being credit constrained. This is consistent with a priori expectation since a
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

large household represents a large responsibility demanding a substantial financial outlay

which might not be satisfied by credit demand. Previous studies (see, for example, Oyedele et
al., 2009) found credit constraint to be associated with larger households. With respect to
productivity, increasing household size reduces productivity by about 8.1 kg/ha. This appears
counterintuitive especially regarding the role of household members in agricultural
production. However, a reason to support this observation stems from the productivity and
efficiency of family labour as compared to hired labour. It is likely that hired labour is more
productive than family labour thus, a large household might depend more on family labour
than on hired labour. Another dimension has to do with the financial burden of fending for a
large household which reduces the likelihood of purchasing inputs for farming.

Locality influences productivity and the probability of being credit constrained. In both cases,
it is a negative determinant. The implication of the negative effect of locality on constraint
status is that farmers residing in rural areas are less likely to be credit constrained. The
marginal effect suggests that the probability of rural farmers being credit constrained goes
down by 2.4 percentage points. This result is surprising but may suggest the microcredit
principle of disbursing smaller amounts to poorer households. In addition, rural households
value social capital so much that they may not be willing to borrow substantial amounts and
fail to pay, a situation that diminishes their social capital. Risk aversion may also be implied
in this observation. For productivity, the negative effect implies that rural farmers achieve
106.9 kg/ha less than their urban counterparts. Plausible explanation for this finding is
information asymmetry on modern methods of production which is skewed in favour of
urban dwellers. Further, rural farmers have poorer proximity to inputs usually due to
transaction costs and infrastructural inadequacies [4].
Farm size negatively affects productivity. The result implies that increasing farm size
decreases productivity. Specifically, an additional hectare decreases productivity by 22.4
kg/ha. This confirms the arguments that smallholder farms are more productive than large
scale farms. This observation also corroborates the findings of Ekbom (1998) and Odhiambo
(1998). Ekbom (1998) argues that smaller farms are often forced to intensify production to
sustain household welfare whereas larger farms can afford to pursue more extensive

10
 cultivation. Odhiambo (1998) observes that smaller farmers tend to use more labour per unit
of land than the larger ones.

The level of commercialization is positively related to productivity. This implies that a

percentage increase in commercialization increases productivity by 4.1 kg/ha. This means
that commercial farmers are more likely to increase productivity through the purchase of
productivity enhancing inputs financed by revenue raised from sale.
Farm mechanized equipment is expectedly positively related to productivity. Farmers who
have mechanized equipment achieve 181.4 kg/ha more than their counterparts without
equipment. Intuitively, mechanized equipment enables farmers to expand farm sizes beyond
the use of rudimentary tools such as hoes and cutlasses. In addition, it is likely that owners of
mechanized equipment rent them out to raise additional income which is then reinvested into
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

farming through purchases of productivity enhancing inputs. On the basis of this, the need for
credit by owners of farm mechanized equipment would be minimised. This could explain
why farm mechanized equipment does not significantly influence credit access and ease
constraints even though it has the expected signs.

Farm non-mechanized equipment is a positive determinant of credit access only. Ownership

of farm non-mechanized equipment increases the likelihood of accessing credit. The marginal
effect suggests that owning farm non-mechanized equipment increases the probability of
accessing credit by about 11 percentage points. It is not certain why farm mechanized
equipment does not affect credit access but farm non-mechanized equipment does. But it is
speculated that small credit amounts might be responsible for this. Farmers with farm non-
mechanized equipment or very simple tools might be willing to receive small credit amounts
(proportional to the value of their equipment) that farmers with mechanized equipment might
see as insignificant.
While group membership negatively affects credit constraint, it positively affects credit
access and productivity. The positive coefficient for credit access indicates that farmers who
are active members of agricultural, credit, or trade groups are more likely to access credit.
The marginal effect indicates that if non-members were to become active members their
probability of accessing credit will increase by about 11.6 percentage points. Probably, credit
institutions see group membership as collateral from the perspective of collective
responsibility for the risk of default. Also, group membership may help farmers to reduce
transaction costs and overcome information asymmetry in the credit markets. Ghatak (2000)
argues that lending through group triggers peer selection effect among farmers who have
reasonable knowledge of each other, and this results in increased production and income.
Added to this, Akudugu et al. (2009) suggest that farmer based organizations disseminate
information to their members and also there is joint guarantee by association members which
increases their probability of accessing credit. For credit constraint, membership reduces the
likelihood of being constrained. The marginal effect shows that becoming an active member
of agricultural, credit, or trade groups decreases the probability of being credit constrained by
about 2 percentage points. This result confirms the study by Ali et al. (2014). The joint
liability could make a case for members to secure the full amounts they apply for. With
respect to productivity, being a member of a group increases productivity by 56.46 kg/ha.

11
 This result is plausible because membership of associations or groups brings about the
benefits of increased access to information. These pieces of information are vital for
production decision making by farmers.

Household durable assets index is a negative determinant of credit constraint. This implies
that farmers with more valuable assets are less likely to be credit constrained. In other words,
the probability of being credit constrained decreases for farmers with relatively more assets.
This means assets acquisition enables farmers to obtain the full amounts they apply for, thus
easing credit constraints. This conforms to the findings of Baiyegunhi et al. (2010). Assets
are important collateral to credit institutions, thus, farmers with valuable assets are seen as
creditworthy and possess the capacity to repay. For productivity, as assets increase,
productivity increases by 42.34 kg/ha. This could be explained by the fact that assets
acquisition by farmers increases their creditworthiness and this eases liquidity and input
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

supply constraints thus leading to increased agricultural productivity.

5. Conclusions
The study examines credit access, credit constraint and productivity of farm households in the
northern savannah ecological zone of Ghana using the conditional mixed process (CMP)
approach. The CMP corrects for both heterogeneity and sample selection bias thereby
providing consistent parameter estimates. The descriptive statistics revealed that fewer
farmers in the study area were credit constrained. The results drawn from the estimations
indicate that credit access by farmers in the study area was significantly influenced by age,
literacy, farm non-mechanised equipment and group membership. Moreover, credit constraint
conditions were significantly determined by household size, locality, group membership, and
household durable assets. Finally, factors influencing farmers productivity include marital
status, household size, locality, farm size, commercialization, farm mechanised equipment,
group membership, and household durable assets.

The results show that group membership has an important implication for the development of
agriculture in Ghana. To increase access to credit and reduce credit constraint for increased
productivity, well-functioning and vibrant farmer-based organizations is paramount. It is
recommended therefore that Ghana’s Ministry of Food and Agriculture should create a
separate department tasked with the responsibility of creating, registering, training, and
building capacity of farmer groups as well as linking them to critical services, in this case
credit. The creation of the department is meant to prioritize the formation and functioning of
farmer-based organizations beyond current efforts. A practical and more effective way is to
build a data bank on farmer-based organizations which should be accessible to stakeholders
such as financial institutions. On the farmers’ front, it is recommended that farmers should
effectively support the efforts by the ministry to form and maintain effective farmer groups to
take advantage of credit facilities provided by lending institutions. Credit institutions are
willing to offer credit to groups because of the joint liability characteristic which minimizes
risks.
Literacy is also key to stimulating credit access. The study recommends the development of
an adult and financial literacy curriculum by the Non-Formal Education Division of Ghana’s
Ministry of Education for the training of farmers to improve their literacy levels. Certificates
of successful completion should then be issued to members of a group and the entire group.
Credit institutions as part of a special package should be encouraged to acknowledge holders

12
 of these certificates as literates. Further, this will offer farmers opportunity to gain functional
literacy for enhanced production.
Given that rural farmers are less productive, the study recommends the establishment of
centres carefully identified and sited for the delivery of productivity enhancing inputs in rural
areas. These centres should be at vantage points to enhance farmers’ physical and financial
accessibility to modern inputs. These centres would erase or minimise the issue of transaction
costs and other logistical constraints in reaching urban centres to acquire these inputs. These
centres should also encourage the use of high yielding crop varieties and appropriate
agricultural mechanization. In line with this, a well targeted input delivery programme should
be vigorously embarked on. This would also improve commercialization - another stimulant
of productivity.
Another recommendation is that the Ministry of Food and Agriculture should embark on a
massive extension drive to sensitize farmers on the need to cultivate farm sizes for which
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

they can balance the size with their financial capacity of acquiring productivity enhancing
inputs since larger farms are less productive. A practical way is to establish demonstration
farms to reveal the benefits of intensive agriculture to farmers. It is further recommended that
government should subsidize farm mechanized equipment to enable farmers own these
equipment so as to increase productivity.
Notes
1. This is a user written command in the Stata software. The cmp mimics a number of official and user-
written Stata commands, the theoretical specifications of which are presented in Roodman’s paper.
2. See details in Roodman (2011) as the paper extensively treats how to do this.
3. The exchange rate as quoted by ghs.fxexchangerate.com as at 1 July, 2011 was US$1.00 = GHS 1.53.
4. We acknowledge what is described here is the baseline situation.

Acknowledgement
We are grateful to USAID and METSS for granting us access to the Feed the Future baseline

dataset for Ghana on which this study is based.

References
Abba, I.Y., Madaki, M.J. and Benisheik, K.M. (2015), “Analysis of credit performance of
small-scale farmers in North-Eastern part of Yobe State, Nigeria”, IOSR Journal of
Agriculture and Veterinary Science, Vol. 8 No. 7, pp. 2319–2372.
Abdallah, A. (2016), “Agricultural credit and technical efficiency in Ghana: is there a
nexus?”, Agricultural Finance Review, Vol. 76 Issue 2, pp. 309 – 324.
Akerlof, G.A. (1970), “The market for lemons: quality uncertainty and the market
mechanism”, Quarterly Journal of Economics, Vol. 84 No. 3, pp. 488–500.
Akudugu, M.A. (2016), “Agricultural productivity, credit and farm size nexus in Africa: a
case study of Ghana ", Agricultural Finance Review, Vol. 76 Issue 2, pp. 288 – 308.

13
 Akudugu, M.A., Egyir, I.S. and Mensah-Bonsu, A. (2009), “Women farmers’ access to credit
from rural banks in Ghana”, Agricultural Finance Review, Vol. 69 No. 3, pp. 284–
299.
Akudugu, M.A., Guo, E. and Dadzie, S.K. (2012), “Adoption of modern agricultural
production technologies by farm households in Ghana: what factors influence their
decisions?”. Journal of Biology, Agriculture and Healthcare, Vol. 2 No. 3, pp. 1–13.
Ali, D.A., Deininger, K. and Duponchel, M. (2014), “Credit constraints, agricultural
productivity, and rural nonfarm participation evidence from Rwanda”, Policy
Research Working Paper, No. 6769, World Bank, Washington DC.
Atieno, R. (2001), “Formal and informal institutions lending policies and access to credit by
small-scale enterprises in Kenya: an empirical Assessment”, AERC Research Paper,
No. 111, African Economic Research Consortium, Nairobi.
Awotide, B.A., Abdoulaye, T. Alene, A. and Manyong, V.M. (2015), “Impact of access to
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

credit on agricultural productivity: evidence from smallholder cassava farmers in

Nigeria”, paper presentation at the International Conference of Agricultural
Economists (ICAE), August 9-14, Milan, Italy, available at:
http://ageconsearch.umn.edu/bitstream/210969/2/Awotide-
Impact%20of%20Access%20to%20Credit%20on%20Agricultural%20Productivity-
71.pdf (accessed 12 May 2016).
Awunyo-Vitor, D., Al-Hassan R.M., Sarpong, D.B. and Egyir, I. (2014), “Agricultural credit
rationing in Ghana: what do formal lenders look for?”, Agricultural Finance Review,
Vol. 74 No. 3, pp. 364 – 378.
Baiyegunhi, L.J.S., Frazer, G.C.G. and Darroch, M.A.G. (2010), “Credit constraints and
household welfare in the Eastern Cape Province, South Africa”, African Journal of
Agricultural Research, Vol. 5, pp. 2243-2252.
Baker, C.B. and Hopkins, J.A. (1979), “Concept of finance capital for capital using
agriculture”, The American Journal of Agricultural Economics, Vol. 51 No. 5, pp.
1056–1064.
Bell, C., Srinivasin, T.N. and Udry, C. (1997), "Rationing, spillover, and interlinking in credit
markets: the case of rural Punjab", Oxford Economic Papers. Vol. 49 No. 4, pp. 557-
85.
Boucher, S., Guirkinger, C. and Trivelli, C. (2006), “Direct elicitation of credit constraints:
conceptual and practical issues with an empirical application to Peruvian agriculture”,
Working Paper, No. 07-004, Department of Agricultural and Resource Economics
University of California, Davis.
Carter, M.R. (1988), "Equilibrium credit rationing of small farm agriculture", Journal of
Development Studies, Vol. 28, pp. 83-103.
Dabone, A.J., Osei, B.A., and Petershie, B.E. (2014), “Determinants of access to credit for
cash crop production in Ghana: a case study of the cocoa industry”, Developing
Country Studies, Vol.4 No.14, pp. 63-72.
Denkyirah, E.K., Aziz, A.A., and Denkyirah, E.K. Nketiah, O.O and Okoffo, E.D (2016),
“Access to credit and constraint analysis: the case of smallholder rice farmers in
Ghana”, Journal of Agricultural Studies, Vol. 4 No. 2, pp. 53-72.
Duong, P.B., and Izumida, Y. (2002), “Rural development finance in Vietnam: a
microeconometric analysis of household surveys”, World Development, Vol. 30 No.
2, pp. 319–335.

14
 Ekbom, A. (1998), “Some determinants to agricultural productivity- an application to the
Kenyan highlands”, presented at the World Conference of Environmental Economics,
25-27 June, Venice, Italy.
Etonihu, K.I., Rahman, S.A. and Usman, S. (2013), “Determinants of access to agricultural
credit among crop farmers in a farming community of Nasarawa State, Nigeria”,
Journal of Development and Agricultural Economics, Vol. 5 No. 5, pp. 192-196.
Feder, G., Lau, L.J., Lin, J.Y. and Luo, X. (1990), “The relationship between credit and
productivity in Chinese agriculture: a microeconomic model of disequilibrium”,
America Agricultural Economic Association, Vol. 72 No. 5, pp. 1151-1157.
Foltz, J.D. (2004), “Credit market access and profitability in Tunisian agriculture”, European
Review of Agricultural Economics, Vol. 30 No. 3, pp. 229–240.
Food and Agriculture Organization (2014), “Analysis of public expenditure in support of the
food and agriculture sector in Ghana, 2006-2012: a preliminary assessment”,
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Technical Notes Series, Monitoring and Analysing Food and Agricultural Policies.
Food and Agriculture Organization (2015), “Ghana −country fact sheet on food and
agriculture policy trends, available at: http://www.fao.org/3/a-i4490e.pdf, (accessed 6
May, 2016).
Ghana Statistical Service (2013), “2010 Population and housing census: regional analytical
report-northern region”, www.ghana.gov.gh/index.php/about-ghana/regions/northern
(accessed 05 January, 2017).
Ghana Statistical Service (2014), “Ghana living standards survey round 6 (GLSS6)”, Accra,
Ghana.
Ghatak, M. (2000), “Screening by the company you keep joint liability lending and the peer
selection effect”. Economic Journal, Vol. 110, pp. 601-631.
Hussain, A. and Thapa, G.B. (2015), “Fungibility of smallholder agricultural credit: empirical
evidence from Pakistan”, European Journal of Development Research,
doi:10.1057/ejdr.2015.55.
Hussein, H.K. and Ohlmer, B.O. (2008), “Influencing the credit constraint on production
efficiency: the case of farm households in Southern Ethiopia”, Swedish University of
Agricultural Science, Sweden.
Kimhi, A. (2003), “Plot size and maize productivity in Zambia: the inverse relationship
revisited”, Discussion Paper No. 10.03, Hebrew University of Jerusalem, Jerusalem.
Kuwornu, J.K.M., Ohene-Ntow, I. and Asuming-Brempong, S. (2012), “Agricultural credit
allocation and constraint analysis of selected maize farmers in Ghana”, British
Journal of Economics, Management and Trade, Vol. 2 No. 4, pp. 353–374.
Larson, D.F., Otsuka, K., Matsumoto, T. and Kilic, T. (2012), “Should African rural
development strategies depend on smallholder farms? An exploration of the inverse
productivity hypothesis”, Policy Research Working Paper No. 6190.
Lawal, J.O., Omonona, B.T., Ajani, O.I.Y. and Oni, O.A. (2009), “Determinants of
constraints to credit access among cocoa farming households in Osun State”, Pakistan
Journal of Social Sciences, Vol. 6, pp. 159–163.
Mazumdar, D. (1965), “Size of farm and productivity: a problem of Indian peasant
agriculture”. Economica, Vol. 32 No. 126, pp. 161-173.
Mellor, J. (1990), “Agriculture on the road to industrialization”, in Eicher, C.K. and Staatz, J.
M. (Ed.), Agricultural Development in the Third World, 2nd ed., Johns Hopkins
University Press, Baltimore.

15
 Ministry of Food and Agriculture (2011), “Agriculture in Ghana facts and figures (2010)”,
available at: http://mofa.gov.gh/site/wp-content/uploads/.../AGRICULTURE-IN-
GHANA-FF-2010.pdf (accessed 08 May, 2016).
Odhiambo, W. (1998), Productivity, market orientation and agricultural intensification: a
comparative analysis of smallholder farmers in Meru and Machakos Districts of
Kenya. Verlag Ulrich E.Grauer Stuttgart.
Olajide, S.O. (1981), “Meaning and purpose of rural economics”, University Press
Publishing House, Ibadan, Nigeria.
Omonona, B.T., Akinterinwa, A.T. and Awoyinka, Y.A. (2008), “Credit constraint and
output supply of cowan farmers in Oyo state Nigeria”, European Journal of Social
Sciences, Vol 6 No. 3, pp. 382–390.
Owuor, J. (2000), “Determinants of agricultural productivity in Kenya, Kenya agricultural
marketing and policy analysis project”. Tegemeo Kenya Agricultural Research
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Institute, Michigan State University.

Oyedele, G.A., Akintola, J.O., Rahji, M.A.Y. and Omonona, B.T. (2009), “Credit constrained
condition of farm households and profitability of agricultural production in Nigerian
agriculture”, Journal of Agricultural and Food Sciences, Vol. 4 pp. 192-201.
Ozowa, V.N. (1995), “Information needs of small-scale farmers in Africa: the Nigerian
example”, Quarterly Bulletin of the International Association of Agricultural
Information Specialists, Vol. 40 No. 1 pp. 1-3.
Quartey, P., Udry, C., Al-Hassan, S. and Seshie, H. (2012), “Agricultural financing and credit
constraints: the role of middlemen in marketing and credit outcomes in Ghana”,
Working Paper, International Growth Centre.
Rao, V. and Chotigeat, T. (1981), “The inverse relationship between size of land holdings
and agricultural productivity”. American Journal of Agricultural Economics, Vol. 63,
No. 3, pp. 571-574.
Roodman, D. (2011), “Fitting fully observed recursive mixed-process models with cmp”, The
Stata Journal, Vol. 11 No. 2, pp. 159–206.
Seck, M.A. (2014), “Access to credit of small and medium firms in Senegal”, AERC
Research Proposal, African Economic Research Consortium, Nairobi, Kenya.
Solow, R. (1957), “Technical change and the aggregate production function”, Review of
Economics and Statistics, Vol. 39, pp. 312-320.
Stiglitz, J. and Weiss, A. (1981), “Credit rationing in markets with imperfect information”,
American Economic Review. LXXI, pp. 393-410.
Tinbergen, J. (1942), “Zur Theorie der langfristigen Wirtschaftsentwicklung”,
Weltwirtschaftliches Archiv, Band 55:1.
USDA Grain Report (2012), “Ghana Exporter Guide”, available at: http://goo.gl/lmrBSz
(accessed 10 June, 2016).
Valerio, A.T. (2014), “Determinants of agricultural productivity of selected major crops in
the Calabarzon region, Philippines”, Global Business and Economics Research
Journal, Vol. 3 No. 7, pp.16-31.
Weber, R. and Musshoff, O. (2012), “Is agricultural microcredit really more risky? Evidence
from Tanzania”, Agricultural Finance Review, Vol. 72 No. 3, pp. 416 – 435.
Wiebe, K.D., Soule, M.J., and Schimmelpfennig, D.E. (2001), “Agricultural productivity for
sustainable food security in sub-Saharan Africa”. FAO Corporate Document

16
 Repository, available at: http://www.fao.org/docrep/003/X9447E/x9447e06.htm
(accessed 10 January, 2017).
World Trade Organization (2014), World Trade Policy Review, Ghana, available at:
http://www.wto.org/english/tratop_e/tpr_e/s298_e.pdf, (accessed 6 May, 2016).
Woutersen, T. and Khandker, S.R. (2013), “Estimating the effects of credit constraints on
productivity of Peruvian agriculture”, Policy Research Working Paper, No. 6658,
World Bank, Washington DC.
Zepeda, L. (2001), “Agricultural investment, production capacity and productivity”, FAO
corporate document repository, available at: http://
www.fao.org/docrep/003/x9447e/x9447e00.htm (accessed 16 June, 2016).
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

[Appendix about here]

17
 Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Table I. Variables, measurement and expected signs

A priori expectation
Credit Credit Productivity
Variables Measurement Access Constraint

Dependent variables
Credit access Dummy: 1 = if farmer has access to credit; 0 otherwise
Credit constraint Dummy: 1 = if farmer is credit constrained; 0 otherwise
Productivity Output per hectare
Independent variables
Gender Dummy: 1 = if male; 0 = otherwise + +/- +
Age Number of years of household head - - -
Married Dummy: 1 = if married; 0 = otherwise - +/- +
Literacy Dummy: 1 = if farmer can read and write any language; 0 = otherwise + - +
Household size Number of persons in the household - - +/-
Locality Dummy: 1 = if farmer resides in rural area; 0 = otherwise - + -
Farm size Number of hectares + - +/-
Commercialization Value of sales/value of production + - +
Farm_MEC Dummy: 1 = if farmer has access to farm mechanised equipment; 0 otherwise + - +
Farm_Non_MEC Dummy: 1 = if farmer has access to farm non-mechanised equipment; 0 otherwise +/- +/- +/-
Means_TRANS Dummy: 1 = if farmer has easy access to transport; 0 otherwise + +/- +
Group Membership Dummy: 1 = if farmer is an active member of agricultural, credit, or trade group; 0 + - +
otherwise
HH_Expenditure Ghana cedis - - +
HH_durable_asset Index of household durable assets (e.g., TV, radio sets, furniture) + - +
Brong Ahafo Dummy: 1 = if farmer is in Brong Ahafo Region; 0 otherwise +/- +/- +/-
Northern Dummy: 1 = if farmer is in Northern Region; 0 otherwise +/- +/- +/-
Upper East Dummy: 1 = if farmer is in Upper East Region; 0 otherwise +/- +/- +/-
Upper West Dummy: 1 = if farmer is in Upper West Region; 0 otherwise +/- +/- +/-
 Table II. Summary statistics
Variables Mean SD Minimum Maximum
Credit access 0.306 0.461
Credit constraint 0.844 0.363
Productivity 606.8 565.4 17.65 13,333
Gender 0.877 0.329
Age 44.27 16.13 18 100
Married 0.848 0.359
Literacy 0.166 0.372
Household size 6.095 3.396 1 35
Locality 0.823 0.382
Farm size 1.980 2.547 0.03 64.75
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Commercialization 28.70 30.91 0 100

Farm_MEC 0.031 0.172
Farm_Non_MEC 0.905 0.293
Means_TRANS 0.809 0.393
Group membership 0.320 0.467
HH_Expenditure 468.2 912.7 0 39,385
HH_durable_asset 1.306 1.209 0 8.600
Brong Ahafo 0.083 0.275
Northern 0.665 0.472
Upper East 0.175 0.380
Upper West 0.078 0.267
 Table III. CMP estimates of credit access, credit constraint and productivity
Credit Access Credit Constraint Productivity
Variable Coefficient Marginal effect Coefficient Marginal effect Coefficient
Gender 0.0100 0.0034 0.1221 0.0118 -1.9845
(0.0810) (0.0276) (0.1282) (0.0124) (32.5910)
Age -0.0075*** -0.0026*** -0.0021 -0.0002 -0.1901
(0.0017) (0.0006) (0.0027) (0.0003) (0.6567)
Married 0.0325 0.0118 -0.1680 -0.0162 67.4631**
(0.0760) (0.0259) (0.1270) (0.0123) (30.4291)
Literacy 0.2405*** 0.0820*** 0.0271 0.0026 24.3298
(0.0716) (0.0243) (0.1206) (0.0116) (29.5809)
Household size 0.0013 0.0004 0.0283** 0.0027** -8.0634**
(0.0081) (0.0028) (0.0142) (0.0014) (3.2478)
Locality 0.0304 0.0104 -0.2512** -0.0243** -106.9260***
(0.0684) (0.0233) (0.1250) (0.0121) (27.8448)
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

Farm size 0.0068 0.0023 0.0000 3.78e-06 -22.3539***

(0.0103) (0.0035) (0.0240) (0.0023) (4.2798)
Commercialization -0.0003 -0.0001 0.0014 0.0001 4.0836***
(0.0009) (0.0003) (0.0015) (0.0001) (0.3487)
Farm_MEC 0.1442 0.0491 -0.0830 -0.0080 181.4028***
(0.1461) (0.0498) (0.2205) (0.0213) (60.3931)
Farm_Non_MEC 0.3223*** 0.1099*** 0.0947 0.0091 -9.8017
(0.0928) (0.0314) (0.1389) (0.0134) (35.3932)
Means_TRANS 0.1124 0.0383 0.0420 0.0041 -22.8860
(0.0690) (0.0235) (0.1148) (0.0111) (27.3301)
Group membership 0.3413*** 0.1163*** -0.2068** -0.0200** 56.4599***
(0.0525) (0.0175) (0.0840) (0.0082) (21.6965)
HH_Expenditure -0.0000 -4.25e-06 -0.0000 -2.74e-06 -0.0067
(0.0000) (1.08e-05) (0.0001) (6.64e-06) (0.0110)
HH_durable_asset -0.0003 -0.0001 -0.0902*** -0.0087*** 42.3438***
(0.0229) (0.0078) (0.0339) (0.0033) (9.4413)
Brong Ahafo 0.0547 0.0186 0.2349 0.0227 31.0314
(0.1301) (0.0444) (0.2093) (0.0202) (52.3660)
Northern -0.0022 -0.0008 0.1305 0.0126 -18.6431
(0.0979) (0.0334) (0.1448) (0.0140) (39.2316)
Upper East 0.0812 0.0277 0.0313 0.0030 -41.1126
(0.1085) (0.0370) (0.1600) (0.0155) (43.5050)
Constant -0.8074*** 1.7948*** 587.1660***
(0.1780) (0.2850) (70.3073)
rho_12 -0.9985***
(0.0636)
rho_13 -0.0045
(0.0240)
rho_23 -0.0294
(0.0340)
Observations 2,921
LR Chi2(51) 409.11***
Log likelihood -24618.351
Notes: Standard errors in parentheses. *** ‫ < ݌‬0.01; ** ‫ < ݌‬0.05; * ‫ < ݌‬0.1
 Appendix
Table AI. Farmers’ credit access, credit constraint and productivity: baseline specifications
Variable Credit Access Credit Constraint Productivity
Gender 0.0202 0.2307 -1.9845
(0.0813) (0.1698) (32.6919)
Age -0.0074*** -0.0087** -0.1901
(0.0017) (0.0037) (0.6587)
Married 0.0417 -0.1648 67.4631**
(0.0762) (0.1664) (30.5233)
Literacy 0.2320*** 0.1695 24.3298
(0.0716) (0.1499) (29.6724)
Household size 0.0007 0.0375** -8.0634**
(0.0081) (0.0181) (3.2578)
Locality 0.0274 -0.3382** -106.9260***
Downloaded by University of Sussex Library At 11:35 23 September 2017 (PT)

(0.0687) (0.1610) (27.9310)

Farm size 0.0071 0.0110 -22.3539***
(0.0103) (0.0322) (4.2930)
Commercialization -0.0003 0.0014 4.0836***
(0.0009) (0.0019) (0.3498)
Farm_MEC 0.1579 0.0171 181.4028***
(0.1461) (0.2928) (60.5800)
Farm_Non_MEC 0.3151*** 0.3662* -9.8017
(0.0928) (0.1973) (35.5028)
Means_TRANS 0.1024 0.0902 -22.8860
(0.0690) (0.1513) (27.4147)
Group Membership 0.3389*** -0.0379 56.4599***
(0.0525) (0.1074) (21.7637)
HH_Expenditure -0.0000 -0.0000 -0.0067
(0.0000) (0.0001) (0.0110)
HH_durable_asset -0.0006 -0.1261*** 42.3439***
(0.0230) (0.0447) (9.4706)
Brong Ahafo 0.0410 0.3232 31.0314
(0.1308) (0.2722) (52.5281)
Northern -0.0076 0.1693 -18.6431
(0.0981) (0.1918) (39.3531)
Upper East 0.0808 0.1283 -41.1126
(0.1087) (0.2128) (43.6396)
Constant -0.7990*** 0.9500** 587.1660***
(0.1788) (0.3900) (70.5250)
Observations 2,881 888 2,921
Log likelihood -1728.85 -364.65 -
LR chi2 101.34*** 31.08** -
F-Value - - 16.84***
Pseudo R2/R2 0.0285 0.0409 0.0898
Notes: Standard errors in parentheses. *** ‫ < ݌‬0.01; ** ‫ < ݌‬0.05; * ‫ < ݌‬0.1