Credit constraints in adopting rhizobial inoculation technology among smallholder soybean farmers in northern Ghana

Lack of finance is a major constraint for the smallholder soybean farmers in northern Ghana. The area is affected by soil degradation, poverty, and food insecurity, while a majority of the people in the area get their livelihood from agriculture. As a possible solution for the three problems, a natural biofertilizer and biocontrol agent, rhizobium bacteria, can be introduced to the rhizospheres of the soybean. This is usually done by applying rhizobium bacteria to the seeds of a legume prior to planting. This rhizobial inoculation technology improves plant growth, nutrient availability and uptake, as well as yields, thereby increasing the income and food security of the smallholder farmers. A credit to be invested in rhizobium inoculation technology would provide smallholder farmers with the opportunity to improve soil fertility and increase farm productivity, improving their food security and enabling them to earn additional income. The private market for rhizobial inoculants is nascent, but many of the farmers report financial constraints. To create a functioning market and to realise the social and environmental benefits of soybean cultivation and rhizobium inoculation technology, it is important to understand the causes of credit constraints of smallholder farmers and how to reduce them. In this thesis, I study the prevalence and the determinants of credit constraints among smallholder soybean farmers by applying a logistic regression model to a sample of 133 smallholder farmers in northern Ghana. I first define credit constrained status of the farmers and conclude that the prevalence of observable credit constraints in the sample is 57.1%. I conclude that there are two broad categories of variables affecting a farmer’s status as credit constrained. The first of these is the type of guarantees that a farmer can offer to the lender. Such guarantees are represented by membership in a farmers' association (and hence access to possible joint guarantees), existing assets such as ownership of cows, and a farmer's experience in soybean production (reflecting knowledge of good investment decisions in the sector). The second category relates to the supply of credit and the factors affecting it. The factors affecting credit supply identified in this study are regional disparities and loans targeted to a certain group, such as women. By influencing the supply and conditions of credit, the financial constraints of smallholder farmers can be alleviated. Such policy interventions, combined with other leverage points such as social learning and access to information, contribute to the adoption of desirable farming practices. Because of the many benefits of rhizobial inoculation in soybean production, its adoption could be promoted by offering credit directed particularly for the adoption of this technology. This would benefit not only the farmers but have broader benefits in the form of climate change adaptation and mitigation