Resolving the Constraints in Accessing Microcredit: The Neglected Views of the Smallholder Farmers

Abstract

Access to financial resources by smallholder farmers remain a daunting challenge in spite of increasing numbers of Microfinance Institutions (MFIs) in Ghana. This paper contributes to the debate in addressing gaps created by an ever increasing numbers of MFIs yet the declining number of small businesses, particularly smallholder farmers having access to credit. Using data from 104 smallholder farmer microcredit borrowers of Ada East in the Greater Accra Region, the paper analysed the constraints preventing borrowers from accessing microcredit. Random sampling was used to obtain information from farmers using semi structured questionnaire. The Kendell Coefficient of concordance was used to analyse the result to establish the level of agreement among farmers perception about the constraints associated with application and granting of loans. High interest rate (1.76 mean rank) was found to be the most critical constraint. Other constraints in accessing microcredit were credit inadequacy, short repayment duration and farmer based organizations (FBOs) membership requirements. It is recommended that MFIs should put in place mechanism to lower operational costs in order to reduce the cost of borrowing. Finally, simplifying loan application procedures and reducing bureaucracies to reduce delays in loan disbursement will minimize the constraints in access to microcredit. Contribution/ Originality: Challenges associated with lending microcredit to smallholder farmers have been widely discussed in literature. However, the views of farmers on how such challenges could be resolved have largely been ignored. Unlike previous studies, this study analysed and provided solutions to the challenges of microcredit acquisition from the perspective of the farmer. The study, therefore, contributes to bridging the knowledge gap by bringing to fore the solution to address the challenges in accessing microcredit from smallholder farmers" perspective. 1. INTRODUCTION Agriculture is the largest employer of the population in sub-Saharan Africa, employing about 53% of the active working population directly and indirectly. Majority of those employed in the sector directly reside in rural areas and are the most vulnerable to economic and environmental shocks (International Labour Organization, 2017). About 50% of agricultural labour force in sub-Saharan Africa is provided by women yet they are the most denied in terms of resources of production such as land, water, and most importantly agricultural credit (ILO 2015, cited in Food and Agriculture Organization (2017)

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“…The percentages of farmers 75.14% were faced with a lack of storage equipment, 73.14% were faced with a high price of input and 72.54% of respondents were faced with financial constraints which implied that several people have limited access to credit facilities in the study area. Access to financial resources by smallholders remains a daunting challenge in African countries 33 . Also, 71.97% were faced with high cost of transportation, 67.34% were faced with agricultural produce homogeneity constraint, 65.61% were faced with market instability, 64.45% were faced with limited access to land, 54.91% were faced with damages from pests and diseases, 53.47% were faced by soil infertility, 52.89% were faced by poor market demand for farm produce, 49.42% were faced by fire outbreak, 37.86% were faced by flooding while 37.28% were faced by Fulani herd men crisis.…”