Estimation of the Determinants of Credit Demand by Farmers and Supply by Rural Banks in Ghana’s Upper East Region

Credit is a strategic empowerment tool that has the potential to change the life of a person, family or community from a situation of abject poverty to a more dignified life. It can transform self-image, unlock potential and boost the productivity and well-being of the poor and vulnerable, especially farmers. This paper estimates the determinants of credit demand by farmers and supply by Rural Banks in the Upper East Region of Ghana. Semi-structured questionnaire complimented by key informant interviews and focus group discussions were used in gathering data from 250 farmers in 5 districts of Upper East Region. The logit model was used to estimate the determinants of credit demand by farmers and the Tobit model used to estimate the determinants of credit supply by Rural Banks. The findings showed that age of farmers, gender and political affiliations among others are the main determinants of credit demand by farmers. Type of crop grown, farm size and the amount of savings made are some determinants of credit supply by the Rural Banks. It is concluded that demand for credit by farmers and supply of it by Rural Banks in Ghana‟s Upper East Region are determined by socioeconomic and politico-cultural factors. It is recommended that government; the Bank of Ghana and the Rural Banks themselves should develop strategies that aim at enhancing the positive determinants of credit demand and supply and mitigating the negative ones to ensure credit widening and deepening among farmers.