Financing the Physical Marketing Activities of Selected Agricultural Commodities in Ghana

Abstract

The mode of performance and financing of the physical activities of agricultural marketing in Ghana are examined, by studying the transportation, storage and processing of two major food-crops (maize and yam) by market operators in Accra, Kumasi and Techiman markets. The food marketing channels studied, involved intermediaries such as, farmers, village based wholesalers, itinerant and sedentary wholesalers, processors and retailers. Physical market infrastructure, and transport and storage infrastructure were inadequate or in very poor condition. Estimated transport costs, ranged between 24.0 and 83.2 percent of marketing costs, and were found to be higher for headloading and commodity haulage on poor condition roads. Storage costs also accounted for between 2.2 and 17.2 percent of marketing costs. Credit itseds of yam and maize wholesalers, engaged in transportation, storage and processing, ranged between £707,940 and 0746,304 per round trip or between ffll7,990 and 0220,793 per tonne of produce. Credit needs are higher for the wholesaler who decides to vertically integrate her marketing activities, by operating a transport facility or constructing a storage facility, though substantial gains can be obtained. Sources of finance were informal (family and friends, moneylenders, farmers, other market operators) and formal (the banks). The inability of market operators to adequately finance their credit needs for the physical activities can be attributed in part to agricultural credit shortage. This is evident from the high interest rates charged by the highly patronized informal financial sector. The formal financial institutions, expected to provide adequate financing for market operators, are unable to do so due to: weak legal and regulatory framework; poor banking supervision and administration mechanisms; high tax regime; and low recoveiy performance rate, among others. Improving the mode of performance and financing of the physical activities will depend on, Inter alia, improvement of credit delivery mechanisms, provision of enabling environment for financial institutions, development of transport, storage and physical market infrastructure, and market information collection and dissemination.