Evaluating the Impact of Rural Finance on Cocoa Farmers Productivity: A Case Study of Bodi District in Ghana

Background: Agricultural finance from rural and community banks play a major role in increasing both yield and income of rural farmers in agricultural-dependent economies. These finances are needed for purchasing raw materials, paying labor fees and buying farming equipment, etc. However, substantial evidence about their roles in improving farm productivity is lacking, especially in the cocoa sector in Ghana, where rural and community banks are the forerunners in advancing credit to cocoa farmers in Ghana’s deprived rural cocoa-growing communities. This research, therefore, seeks to determine the impact of rural and community banks’ credit on cocoa farmers' productivity in the Bodi District of Ghana.

Methodology: Using random sampling method, a cross-sectional data of 350 cocoa farmers from 5 operational areas (Afere, Bodi, Amoaya, Kama and Suino) located in Bodi District in the Western region. The data were analyzed using descriptive statistics and logistic regression models. Statistical software (SPSS v20 and STATA v14) were used to analyze quantitative data on cocoa productivity.

Results: The results revealed that cocoa farmers with access to credit experienced significant yield increase (p<0.05) with a mean of 359.71 kgha-1 as compared to 235.30 kgha-1 for non-credit takers. Further, only 34.3% of farmers accessed credit for farming. With Pseudo R2 value of 0.78, farm tenure system, fertilizer use, access to credit and access to extension services significantly influenced cocoa yield, while the age of cocoa farmer, age of farm trees and vulnerability of farm to natural disaster negatively affected cocoa yield. Tukey HSD results (p<0.00) indicate that rural banks credit allocations to non-agricultural activities such as trade and transport, and social loans had the highest percentage means which suggests that agriculture is treated less favorable in rural banks' credit portfolio. These findings give credence to the assertion that rural banks are deviating from their core mandate of supporting agriculture in Ghana.

Conclusion: This study reaffirms the supporting roles played by rural and community banks in increasing cocoa yield in Ghana. However, this research recommends that, the Bank of Ghana should closely monitor the activities of these unit banks to reduce the instances of diverting all their funds to non-agricultural related activities.