Farmer innovations in financing smallholder maize production in Northern Ghana

Abstract

Purpose The purpose of this paper is to explore smallholder agricultural financing in Ghana’s Northern region by identifying farmers’ preferred traditional and innovative financing methods and estimating the determinants of use of innovative financing methods. Design/methodology/approach This paper presented a list of documented traditional financing methods to farmers during in-depth interviews and employed descriptive statistics to summarize choice and amounts sourced from traditional methods. Two questions from the survey revealed a felt need for extra financing sources for credit-rationed farmers. Farmers with positive responses to either or both questions were classified as “users of innovative financing”. The authors then used a probit model to examine factors that influence decisions to use innovative financing method. Findings Farmers’ own savings, reinvesting past season’s profits and financing maize production with income from other commercial crops were the most popular traditional methods. The authors found complementary relations between formal and informal lending systems in the rural financial market. Smallholders also took farm and non-farm “by-day” jobs to raise income for farm investment and/or joined Village Savings and Loans Associations (VSLAs) specifically to take advantage of possible credit opportunities. These two latter methods were operationalized in this study as innovative agricultural financing. The results show that access to credit, social capital and market participation increased the likelihood of using innovative financing methods. Alternatively, farmer group membership, diversity in crop production and being a household head diminished the likelihood of innovative financing use. Practical implications The activities of VSLAs can be regulated and expanded to spread its benefits to more farmers. Also, creating avenues for dry season labour market participation in the region could enable farmers raise capital for farm investment. Originality/value This study explores existing practices and farmer innovations to agricultural financing and, by so doing, deviates from the vast literature focussing mainly on microcredit provisioning as the main model of smallholder agricultural financing in Africa.

Agriculture for Sustainable Development: A SWOT-AHP Assessment of Ghana’s Planting for Food and Jobs Initiative

“…Ghana's agricultural sector policies have evolved over the years through adjustments and reforms to meet expected goals and needs. To transform the Ghanaian economy into a developed nation by 2029, "Ghana Vision 2020" was launched in 1995 with a particular focus on agricultural transformation [6]. Since then, a number of policy interventions have been implemented to achieve this goal.…”

“…Since then, a number of policy interventions have been implemented to achieve this goal. Appiah-Twumasi [6] outlined the following:…”

“…However, recent studies have found that regional averages for household sizes are significantly higher than that of the national average. For instance, [6] observed that while the northern regional average is 7.7 persons per household, the national average is 4.4 persons. Given that most rural people are predominantly engaged in the agricultural sector, the average household size of 5 persons per household serves as a source of a strong labor potential for farm households.…”

“…Over the last two centuries, Ghana, like other parts of Africa, has struggled to meet its food and nutrition security needs. Notwithstanding, successive governments have pursued various national agendas to arrest the situation [6]. This is made evident by the ratification of global and regional development initiatives such as the MDGs, the SDGs, and the Comprehensive African Agriculture Development Programme (CAADP) of the New Partnership for Africa's Development (NEPAD) [6].…”

“…Notwithstanding, successive governments have pursued various national agendas to arrest the situation [6]. This is made evident by the ratification of global and regional development initiatives such as the MDGs, the SDGs, and the Comprehensive African Agriculture Development Programme (CAADP) of the New Partnership for Africa's Development (NEPAD) [6]. These programmes have been complemented with local-or national-level efforts such as Ghana's agricultural sector policies and programs, such as the Food and Agriculture Sector Development Policy (FASDEP I and II) and the Medium-Term Agricultural Sector Investment Plan (METASIP I and II), as well as the more recent Planting for Food and Jobs (PFJ) program and the One Village One Dam initiative [6,7].…”