The role of savings mobilization on access to credit : a case study of smallholder farmers in Ghana

Purpose: The purpose of this paper is to examine the effect of savings mobilization on access to credit among smallholder farmers’ in the Birim central municipality of Ghana. Design/methodology/approach: A cross-sectional primary data set was used to estimate the factors influencing smallholder farmers’ access to credit and size of loan to be borrowed using the IV-Probit and IV-Tobit model. Findings: The results of the study revealed that savings mobilization has a positive significant impact on access to credit and the total amount of credit one can borrow as well. Other control variables such as transaction cost and farm size depicted a negative significant impact on access to credit. Land ownership, member of an association, household size, years of farming experience and education also showed a positive significant impact on access to credit. Research limitations/implications: The paper only examined the savings effect on credit accessibility among smallholder farmers in one of the municipality’s in the Eastern region of Ghana. Future research should consider all or many municipality for an informed generalization of findings. Practical implications: This paper provides evidence that smallholder farmers knowledge on the financial market is poor and it would require the policymakers or NGOs to organize financial management training programs so that the farmers high ignorance of the financial market will significantly reduce. Originality/value: Although existing studies have examined smallholder farmers’ access to credit, the unique contribution of this paper is the analysis of the impact of saving mobilization on credit accessibility in Ghana, a major access to credit determinant in the financial market. In addition, those researchers who factored in savings as an access to credit determinant did not also consider the casual relationship between these two variables, thus, the present of endogeneity of which this paper does.