Impact of agricultural finance on technology adoption, agricultural productivity and rural household economic wellbeing in Ghana: a case study of rice farmers in Shai-Osudoku District

Abstract

Rural and agricultural finance innovations have significant potential to improve the livelihoods and food security of the poor. Although microfinance has been widely studied, an extensive knowledge gap still exists on the nuts and bolts of expanding access to rural and agricultural finance. This study uses focus group discussion, key informant interview, and quantitative household survey to explore how smallholders access credits and loans influence adoption of modern production technologies and what are perceived limitations to access these financial instruments in the Shia-Osuduku District in the Greater Accra Region of Ghana. The specific objectives of the study are; (1) to assess the challenges rice farmers face in accessing finance, (2) to determine if access to finance impacts the adoption of modern rice production technologies and (3) to determine whether loan investments in improved technologies increase productivity and income levels of farmers. The study noted that issues of mistrust for smallholder farmers by financial institutions act as barriers to facilitating their access to loans and credits. Banks and financial institutions relay their mistrust through actions such as requesting outrageous collateral, guarantors, a high sum of savings capital, and a high interest rate for agriculture loans, delays, and bureaucratic processes in accessing loans. The study suggested that enabling policy environment and frameworks with a supportive rural infrastructure such as warehouse receipt systems can significantly increase farmers' access to credit instruments for investment in modern technologies to increase agricultural productivity, which is essential to address food insecurities and rural poverty issues in Ghana.