Determinants of Access to Credit by Agribusiness Operators in the Kumasi Metropolis, Ghana

Aim: The study was conducted to analyze the factors that influence access to credit by Agribusiness operators in the Kumasi Metropolis of the Ashanti Region of Ghana.

Study Design: The study used a multi-stage sampling technique to select 151 SME operators engaged in the agribusiness sector. Well structured, mostly closed ended questionnaires were used to collect cross sectional data from the respondents.

Location and Place of Study: The study was conducted in the Kumasi Metropolis, which is the capital of Ghana’s second largest city with a population of about 2 million people and has a relatively large agribusiness sector, especially in the informal sector.

Methodology: Both qualitative and quantitative methods were employed to analyze data. The Logit model was employed as the statistical tool to quantitatively analyze the factors that influenced access to credit by the agribusiness operators in the study area.

Results and Discussion: The empirical results showed that the factors that significantly influenced credit accessibility for respondents in the study area were the credit management skills, borrowing experience, possession of collateral security, firm size, extra income earned by operators and membership of business organization. The major constraining factors faced by respondents in their credit application from the formal sector include high interest rate, inadequate loan amount and unfavorable loan terms.

Conclusion and Recommendation: Agri-SME operators should be encouraged to form or join business organizations and also strengthen such associations for enhanced networking leverage. Agri–SME operators should be encouraged to build on their credit management skill by engaging more with financial institutions and strengthening relationship as a means of enhancing credit access. Financial institutions, especially the Rural and Community Banks and Savings and Loans Companies, should strive to offer more competitive terms and conditions, especially interest rates to Agri-SMEs that apply for credit as a group.