Impact of microcredit on small and medium scale agricultural enterprises: Evidence of poultry farming in the Dormaa Municipality, Ghana

Sylvester Amoako Agyemang, BA

Master's thesis

Abstract:

Microcredit is assumed to have direct and indirect impact on the production efficiency, output and income of farmers thereby ensuring sustainable food supply. The research therefore studied the impact of microcredit on small and medium scale poultry production using farm level survey data from the Dormaa Municipality of Ghana. The study was conducted on 61 and 39 randomly selected microcredit receiving and non-receiving poultry farmers respectively using questionnaires. Key informant interviews and focus group discussion were also conducted to triangulate the data. Probit model, data envelopment analysis (DEA) along with inefficiency model and the propensity score matching (PSM) technique along with linear regression models were used to analyse the propensity of farmers taking microcredit and its impact on their farm efficiency, output and income. Results from the probit model show that farmers with higher education, experience, large assets base (land and machinery), micro-savings as well as female farmers are more likely to take microcredit whereas large scale and older farmers are less likely to take microcredit. The inefficiency effect model also revealed that microcredit, higher experience, education, capital, and labour helps farmers to efficiently convert inputs into output whilst large farm size increases inefficiency. Microcredit receiving farms on an average were 14% (assuming a variable return to scale) more efficient than non-receiving farms using the PSM. Again, farmers have to cut wasteful expenditure by 15% to be fully efficient. We also compared the output (eggs and birds/chicken) and income of the treated (microcredit farmers) and the control (non-microcredit farmers) groups using the propensity score matching (PSM) technique and linear regression and the results also indicated that microcredit has a positive impact on both eggs and chicken/birds production and farm income. On an average, farmers receiving microcredit produce 8% and 44% (eggs and birds) and earn 28% income more than non-receiving farmers. Sustaining these impacts can increase output, and subsequently make Ghana self-sufficient in eggs and chicken supply and food secured. Expansion of access and timely distribution of soft agricultural credit to smallholder poultry farmers can improve their output and improve food security and should be the policy direction of the Government of Ghana in ending frozen chicken importation.

Keywords

Microfinance, Microcredit, Technical Efficiency, Technical Inefficiency, Data Envelopment Analysis, Propensity Score Matching, Self-sufficiency, Ghana

Language used: English

Date on which the thesis was submitted / produced: 27. 4. 2017

Thesis defence

• Supervisor: doc. Dr. RNDr. Tomáš Ratinger

Czech University of Life Sciences Prague

Faculty of Tropical AgriSciences

Master programme / field:
Tropical Agriculture / International Development and Agricultural Economics