Access to finance in “loose” agricultural value chains: Evidence from Ghana

Abstract This study sought to establish the determinants of loan application success, loan amount granted, and the percentage of loan request granted to farmers and traders in the cashew value chain (VC) in Ghana’s Bono and Bono-East Regions. The study employed stratified and random sampling to select 998 loan applicants in the cashew value chain. The logit, Tobit, and fractional logit regression models were employed to establish the determinants of loan application success, loan amount granted, and the disbursed-requested ratio, respectively. Loan application success is positively related with education, revenue, banking period, off-takers, value chain testimonial, and membership of VC associations. Loan amount granted is directly related with banking period, being a trader, off-takers, loan product knowledge, value chain testimonial, and VC association membership. The disbursed-requested ratio varies directly with education, revenue, banking period, being a trader, off-takers, value chain testimonial, and VC association membership. The disbursed-requested ratio varies inversely with bank account turnover. A major implication of the study is the emergence of value chain testimonial as a scalable innovation to replace hard-asset collateral in lending practice. Future research could consider a comparative study of a loose and a tight value chain to offer a holistic perspective of agricultural value chain finance.