The effects of microfinance on the productivity of Ghanaian cocoa farmers

Cocoa production is one of the cornerstones of Ghana's economy. However, cocoa yields per hectare of land in the country are among the lowest in the world. Low use of fertiliser has been identified as one of the likely causes of such low yields.

A scheme in Ghana that combines training with fertilizers, insecticides and pesticides on credit to groups of Ghanaian cocoa farmers has shown remarkable success in increasing production and incomes for farmers:

  • Average farm production increased by 20% as a result of the programme
  • The increase in production was worth nearly three times the value of the loan

The same programme also led to an increase in productivity for other non-participating farmers in the same villages. There were also more opportunities for day labourers to find employment. These surprising secondary effects of the programme show that the programme benefits both the participating farmers but also the wider community. The results are based on the first year of a three year study carried out by researchers at Oxford University.

Since many other similar programmes have shown no comparable increase in productivity the Oxford researchers are investigating whether the following factors account for the demonstrated increase in productivity:

  • high interdependence on other group members which facilitates increases in productivity and repayment

  • the de-linking of access to fertilizers and other inputs from access to markets for the cocoa beans;

  •  The fact that the credit supplier has a monopoly over the supply of credit and therefore the threat of exclusion from future credit in case of non-repayment is very effective.

The Oxford researchers are also looking at whether the increase in productivity of other non-participating farmers in the same village is a result of informal knowledge sharing. The increase in demand for labour arises because farmers need help to apply the fertilizers and other inputs, and can use the money normally spent on the fertilizers to pay daily labourers.

The study was carried out in October of 2008, allowing researchers to observe impacts over the complete cycle of Ghana’s main and light cocoa-growing seasons for the 2007/08 harvest.

While the overall productive effect has been positive, gains have not been evenly distributed. The initial results from the study appear to indicate that female cocoa farmers improved their productivity by less than their male equivalents. The Oxford researchers are now carrying out further work to investigate why there is a difference in results for female and male cocoa farmers. This work will be carried out over the 2009/10 cocoa season.

Notes

  1. The study involved 350 farmers in Ghana from the Ashanti, Brong Ahafo, and Western Regions. The following were involved in the evaluation of the programme : economists from the Centre for the Study African Economists at Oxford University; Cocobod, the Ghanaian state-owned cocoa marketing board; Abrabopa, a Ghanaian-Dutch non-profit organisation specialising in the provision of agricultural inputs; and Technoserve, an NGO specialising in capacity building. The study also included a control group, as well as checks to ensure that there was no inadvertent bias in the selection of farmers.

  2. The productivity of Ghanaian cocoa farmers is amongst the lowest in the world. On average Ghanaian cocoa farmers harvest about 400 kg of cocoa per hectare. This compares with 764.7 kg of cocoa per hectare in Cote d’Ivoire.

Outputs

Funding for the Ghana Cocoa Farmers Survey 2008 was provided by grants from the Bill and Melinda Gates foundation and the UK Department for International Development under the "Improving Institutions for Pro-poor Growth" Research Consortium. This research extends previous work conducted under the Global Poverty Research Group.