Microfinance Access: Challenges of Credit Delivery to Crop Farmers in the Yilo Krobo District

Abstract

Accessibility by farmers to is considered as a challenge.. This study explores the difficulties encountered by crop farmers in accessing micro finance assistance to boost their production. Generally, the objective of this study is to establish the extent to which microfinance institutions’ services are accessible to crop farmers and the underlying factors influencing the delivery in Somanya in the Yilo Krobo District. The study adopted a two-stage sampling approach of cluster and random sampling. It covers all crop farmers who have knowledge about microfinance institutions and is a recognised zonal member, are microfinance beneficiaries / have attempted to obtain microcredit from micro finance institutions in suburbs of Somanya but most importantly with knowledge of microfinance institutions. Data was collected using the quantitative instrument of questionnaires for primary data. Secondary data was obtained from the District Directorate of Agriculture, the internet among others. The findings indicate that in terms of types of MFIs there are Four microfinance institutions that were identified as operating in the area namely Rural Banks, Financial Non Governmental Organizations (FNGOs), Government owned institutions and Savings and Loans Company. It was noted that more than half (51.6%) of the time, MFIs provide no reason for refusing loans while 12.9% claim crop farmers are deemed not creditworthy. The MFIs, also maintained that due to farmers’ inability to meet the relevant collaterals/guarantee demands they are unable to obtain the loans. Moreover, MFIs see crop farmers as risky clients who have a high probability of default. The findings also reveal a high level inaccessibility to micro finance services by farmers. Though respondents have good knowledge of MFIs, as much as 80.6% have never had access to financial services provided by these MFIs. Only 19.4% enjoy access once a while. In relation to difficulty of access as much as 87.1% either did not get the loan or said it was very difficult to access. The hypothesis also proved that there is a significant and positive relationship between number of acres cultivated and access to loans. This was significant at r = -0.587 and p = 0.001. The more the acres one cultivated the easier the access to loans. A major recommendation is that government must take a serious look at agricultural productivity and to get involved with direct microfinance interventions to advance micro loans as a form of a prop up of the informal sector and especially provide irrigation services to promote off season farming.