Social Capital and Access to Credit by Farmer Based Organizations in the Karaga District of Northern Ghana

Abstract

Farmer Based Organization (FBO) is one of the key support service actors in agricultural value chains in developing economies. The dimensions of the FBOs that constitute social capital and how they enhance access to credit are the concern of this study.  Information was collected from 210 FBO members and non-members in the Karaga district of Northern Ghana, where FBO activities and agricultural credit services have increased in the last decade. The analytical methods used include principal component analysis-PCA and logistic regression analysis (logit model). The major finding was that the dimensions of social capital such as homogeneity, network connection, level of trust, collective action and the respect for contract had positive significant effect on access to credit. Given the positive effect of the FBOs’ social capital on access to credit, it is recommended that FBO members should make conscious effort to strengthen their FBOs along the social capital dimensions. Officers of financial service organizations tasked to prime FBOs for agricultural credit programs should prime them based on these dimensions.

Keywords: social capital dimensions, FBOs, access to credit, social networks