University of Ghana http://ugspace.ug.edu.gh IMPACT OF WAREHOUSE RECEIPT SYSTEM ON ACCESS TO MARKETS AND INCOME OF SMALLHOLDER MAIZE FARMERS IN THE NORTHERN REGION OF GHANA BY NANA KOFI SAFO THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF DOCTOR OF PHILOSOPHY DEGREE IN AGRICULTURAL ADMINISTRATION DEPARTMENT OF AGRICULTURAL ECONOMICS AND AGRIBUSINESS, COLLEGE OF BASIC AND APPLIED SCIENCES UNIVERSITY OF GHANA, LEGON
Transcript
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IMPACT OF WAREHOUSE RECEIPT SYSTEM ON ACCESS TO MARKETS
AND INCOME OF SMALLHOLDER MAIZE FARMERS IN THE NORTHERN
REGION OF GHANA
BY
NANA KOFI SAFO
THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD
OF DOCTOR OF PHILOSOPHY DEGREE IN AGRICULTURAL
ADMINISTRATION
DEPARTMENT OF AGRICULTURAL ECONOMICS AND AGRIBUSINESS,
COLLEGE OF BASIC AND APPLIED SCIENCES UNIVERSITY OF GHANA,
LEGON
JULY, 2017
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DECLARATION
I, Nana Kofi Safo, declare that with the exception of duly acknowledged citations and
references, this thesis, “Impact of warehouse receipt system (WRS) on access to
markets and income of smallholder maize farmers in the Northern Region of
Ghana” is a product of my own research, under the supervision of Professor Ramatu
Mahama Al-Hassan, Dr. (Mrs.) Irene S. Egyir, and Dr. Henry Anim Somuah. This thesis,
either whole or in part, has never been presented for another degree in this University or
elsewhere.
…………………………….
Nana Kofi Safo(Ph.D Candidate)
This Thesis has been submitted for examination with our approval as supervisors.
…………………………… …………………………….
Prof. Ramatu M. Al-Hassan(Major Supervisor)
Dr. Mrs. Irene S. Egyir(Co-Supervisor)
…………………………...
Dr. Henry Anim Somuah(Co-Supervisor)
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DEDICATION
This thesis is dedicated to my Godfather, Apostle Dr. Ing. Kwadwo Safo for his immense
financial and moral support, and spiritual guidance which has brought me this far. I owe
you a debth of gratitude father, for everything you have done for me. Thank you.
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ACKNOWLEDGEMENT
The first thanks goes to the Almighty God for his guidance and protection which has
made it possible for me to complete this programme successfully. The next thanks go to
my supervisors; Prof. Ramatu M. Al-Hassan, Dr. (Mrs.) Irene S. Egyir and Dr. Henry
Anim Somuah, all of the Department of Agricultural Economics and Agribusiness, for
their advice and excellent supervision of this thesis. My sincere thanks also go to all
lecturers especially the Head of Department, Prof. Daniel Bruce Sarpong for their
excellent tuition, critique and corrections.
My sincere gratitude goes to my dearest, Lawyer Owusu Badu, the General Secretary of
Kristo Asafo Mission of Ghana, for his unflinching support and encouragement. He has
made a great impact in my life and I appreciate it so much. Thanks also go to all the
national officers at Kristo Asafo Head office for their support. I also say a big thank you
to my Mum and Dad, Madam Abena Kyerewaa and Mr. Obibini Kwaku Aning, my
brother, John Aning, and my three sweet sisters, Nhyira Aning, Ama Sika, and Akosua
Safowaa for their care and moral support.
I also greatly appreciate the support of Mr. Alhassan Andani and his team who helped
me in the collection of data. Thanks also go to my close friends and relatives, Ama
Safowaa, Miss Juliana Frimpong, Nhyira Kofi Asare, Stephen Addo Oduro, Mr. Hughes
Lartey, Vera Adu Twumwaa, Janet Takyiwaa, and the entire Ph.D colleagues who,
through diverse ways, helped me to complete this work, I say God richly bless you for
your support and encouragement.
Nana Kofi Safo
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ABSTRACT
Smallholder farmers have limited access to credit for their farming activities due to lack of collaterals that are acceptable by formal financial institutions. The farmers sell immediately after harvest at low prices to ease their financial constraints, which consequently earn them low incomes. In order to overcome these problems, warehouse receipt system (WRS) is suggested as the best alternative scheme. The WRS in Africa however lacks legal and institutional framework to ensure its successful operation. The system is mostly used by large processors, importers and exporters to secure loans for their transactions, and it is unavailable to smallholder farmers who suffer most from financial exclusion due to lack of collateral. This thesis therefore assesses the impact of WRS on access to markets and income of smallholder maize farmers in the Northern Region of Ghana. The study specifically sought to address the following issues: the institutional arrangements of WRS in Ghana, extent of farmers’ awareness and perception of WRS, and effect of WRS on access to credit, output market and farm income. Data was collected from 400 randomly selected maize farmers in six communities in the Northern Region. Apart from descriptive statistics, endogenous switching regression model (ESRM) and propensity score matching (PSM) were employed to assess the effect of WRS on access to credit, output market, and crop income. In terms of institutional arrangements, the study identified partial legislation and slow implementation of commodity exchange market as the key limitations to successful operation of WRS. Over 80% of the farmers perceived the improved storage, market access and reduced transportation cost as the three most important benefits of WRS. The three most important WRS constraints perceived by the majority (80%) of farmers were: unfavourable condition of community warehouses, lack of insurance at community warehouses, and a few lending institutions supporting the system. About 35% of farmers participated in the WRS in 2016. Findings from both the ESRM and the PSM show that the main factors that positively affect smallholder farmers’ participation in WRS are education, farm size, level of production of maize, and membership of farmer-based organisation. Ownership of storage facility, cost of inputs, and payment of taxes reduce the possibility of participation in WRS. Participating in WRS has the potential to increase
1) amount of credit accessed by GH¢219.82 per annum, 2) quantity of maize supplied by 18%; and crop income of smallholder farmers by 13%. In order to sustain the positive impact of WRS, farmers should be encouraged to expand their farm sizes and join FBOs for consistent learning. Policy makers should facilitate the passage of “commodity exchange and warehouse receipt system bill” into law. The law and an active commodity exchange market will boost the confidence of financial institutions to support the WRS.
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TABLE OF CONTENT
Content Page
Declaration i
Dedication ii
Acknowledgement iii
Abstract iv
Table of Content v
List of Tables xi
List of Figures xiii
List of Appendices xiv
List of Acronyms xv
CHAPTER ONE
INTRODUCTION 1
1.1 Background of the study 1
1.2 Problem Statement 7
1.3 Objective of the Study 13
1.4 Relevance of the Study 14
1.5 Organisation of the Thesis 15
CHAPTER TWO 16
LITERATURE REVIEW 16
2.1 Introduction 16
2.2 Promotional Activities to Create Awareness and Inform Adoption
Decision 16
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2.3 Perception of Farmers on Innovation and its Influence on AdoptionDecision 19
2.4 Effect of WRS on Access to Credit from Formal Financial Institutions 20
2.5 Effect of WRS on Access to Output Market by Smallholder Farmers 23
2.6 Effect of Warehouse Receipt System on Farmers’ Income 26
2.7 Institutional Arrangement for the Successful Operation of WRS 27
2.7.1 Responsibilities of Ministry of Food and Agriculture 32
2.7.2 Responsibilities of Ministry of Trade and Industry 33
2.7.3 Responsibilities of Ministry of Local Government andRural Development 36
2.7.4 Responsibilities of Financial Institutions 37
2.7.5 Responsibilities of the Ghana Grains Council 38
CHAPTER THREE 40
METHODOLOGY 40
3.1 Introduction 40
3.2 Conceptual Framework 40
3.3 Theoretical Framework 42
3.3.1 Theory of Storage and Inventory Management 42
3.3.2 Access to Credit 43
3.3.3 Access to Market 46
3.3.4 Theory of Perception 48
3.3.5 Approaches and Framework of Institutional Analysis 49
3.3.6 Theory of Impact Analysis 51
3.3.6.1 Endogenous Switching Regression 53
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3.3.6.2 Propensity Score Matching 58
3.4 Methods of data analysis 61
3.4.1 Assessing the Adequacy of Institutional Arrangement forWRS in Ghana 61
3.4.2 Scope of Promotional Activities and the Extent of Farmers’Awareness about WRS 63
3.4.2.1 Analysis of the Scope of Activities Promoting the WRS 63
3.4.2.2 Analysis of the extent of farmers’ awareness about WRS 64
3.4.3 Evaluation of Perceptions of Farmers about Benefits andConstraints of WRS 66
3.4.3.1 Analysis of Benefits 66
3.4.3.2 Analysis of Constraint of WRS 68
3.4.4 Estimating the Impact of WRS on Access to Credit, Access toOutput Market, and Crop Income 71
3.4.4.1 Model specification 72
3.5 Source of Data 75
3.5.1 Study Area 75
3.5.2 Sampling Procedure 76
3.6 Scope and Limitation of the Study 77
CHAPTER FOUR 79
RESULTS AND DISCUSSION 79
4.1 Introduction 79
4.2 Socio-economic Characteristics of Respondents 79
4.3 Analysis of Institutional Arrangement for Successful Operation of WRS 81
4.3.1 The Operation of Electronic Warehouse receipt System in Ghana 81
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4.3.2 How Electronic Warehouse Receipt (WR) is used to AccessLoan in Ghana 82
4.3.3 Operation of Community Warehouse Receipt System 83
4.3.4 Analysis of Institutional Arrangement for Successful
Operation of WRS 85
4.3.5 Review of the Activities of Supporting Organisations of WRS 88
4.3.5.1 Ghana Grains Council 88
4.3.5.2 Ministry of Trade and Industry 92
4.3.5.3 Ghana Standards Authority 93
4.3.5.4 Ministry of Food and Agriculture 95
4.3.5.5 Financial Institutions 98
4.3.5.6 Ministry of Local Government and Rural Development 100
4.4 Scope of Promotional Activities and the Extent of Farmers’ Awarenessabout WRS 102
4.4.1 Scope of Promotional Activities by Ghana Grains Council 102
4.4.2 Extent of farmers’ awareness about WRS 103
4.4.2.1 Knowledge on Functions of WRS 103
4.4.2.2 Knowledge on Benefits 105
4.4.2.3 Source of Information on WRS 106
4.4.2.4 Participants’ Experience with WRS 107
4.4.2.5 Respondents’ Reasons for Non-Participation in WRS 110
4.5 Perception of Farmers about the Benefits and Constraints of WRS 111
4.5.1 Farmers’ Perception about Benefits of WRS 111
4.5.2 Farmers’ Perception and Ranking of Constraints of WRS 114
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4.5.2.1 Ranking of Constraints of WRS 116
4.6 Impact of WRS on Access to Credit from Formal Financial Institutions 117
4.6.1 Descriptive Analysis on Access to Credit 117
4.6.2 Results of Endogenous Switching Regression Model onAccess to Credit 120
4.6.2.1 Factors Affecting Access to Credit 121
4.6.2.2 Impact of WRS on Access to Credit by ESRM 122
4.6.3 Estimation of Impact of WRS on Access to Credit by the PSM 123
4.6.3.1 Impact of WRS on Access to Credit by PSM 124
4.7 Impact of WRS on access to output market by Smallholder Farmers 125
4.7.1 Descriptive Analysis on Access to Output Market 125
4.7.2 Results of ESRM on Access to Output Market 127
4.7.2.1 Factors Affecting Access to Output Market 128
4.7.2.2 Impact of WRS on Access to Output Market by ESRM 129
4.7.3 Estimation of Impact of WRS on Access to Output Market by PSM 130
4.8 Impact of WRS on Crop Income of Smallholder Farmers 131
4.8.1 Descriptive Analysis on Farmers’ Crop Income 131
4.8.2 Estimation of Impact of WRS on Crop Income of Farmers bythe ESRM 133
4.8.2.1 Factors Affecting Crop Income by Farmers 133
4.8.2.2 Impact of WRS on Crop Income by ESRM 134
4.8.2.2 Estimation of Impact of WRS on Crop Income ofFarmers by PSM 135
4.9Factors Affecting Participation of WRS 137
CHAPTER FIVE 140
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5.0 Summary, Conclusion and Recommendations 140
5.1 Introduction 140
5.2 Summary 140
5.3 Conclusions 142
5.4 Recommendations 143
5.5 Future Research 145
References 146
Appendices 162
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LIST OF TABLES
Table Page
1.1 Certified Electronic Warehouses in the Northern Region of Ghana 8
1.2 Community Warehouses Approved by Ghana Grains Council(Northern Region) 9
3.1 Treatment, Heterogeneity and Transitional Heterogeneity Effects 57
that storage in warehouse receipt system can help smallholder farmers to access
agricultural commodity exchange market in order to obtain good prices for their produce.
Through the system, buyers are assured of the quantity and quality of the commodity, and
the ability of the seller to deliver the goods as scheduled. The system also prevents
cheating on weights and quality; moderates seasonal price variability and promotes
instruments to mitigate price risks (Coulter and Onumah, 2002). The price variability is
prevented through the provision of appropriate storage facility to ensure that grain
surpluses are absorbed after harvest. This sets the price at equilibrium since there is no
excess supply to the market. The storage facility further guarantees adequate future
supply of grain to the market. This prevents shortages and therefore sets the price at
equilibrium.
The WRS functions properly when key fundamentals are in place. Towo and Kimaro,
(2014) note that availability of good physical warehouse facilities is primary requirement
to establish a WRS. This assures all parties that the commodity in question exists, is well
protected and secured. The rights and duties of all stakeholders to the warehouse receipt
system must be clearly defined. There must also be high levels of trust among parties,
particularly the assurance that the warehouse operator will not release the produce to any
party other than the owner or the legitimate bearer of the receipt. There must be a
regulatory body and institution that provides grading and standard services to ensure that
the produce is of the precise type, quantity and quality as stipulated. The legal
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environment must give financial institutions the sole right to sell the commodities in the
event of default by the borrower (Nordier, 2013). The legal framework of the country
must also support the use of warehouse receipt (WR) as a negotiable instrument, which
enables one to transfer the receipt to a third party who is willing to buy the produce.
These arrangements contribute immensely to a successful WRS.
1.2 Problem Statement
Warehouse receipt system is considered as an inventory credit system. Inventory credit
system in Ghana was first established in 1989 by Technoserve (a private non-profit
organisation) on pilot basis. In collaboration with Agricultural Development Bank
(ADB), Technoserve designed the programme with the aim of providing financial
assistance and storage facility to smallholder farmers to enable them obtain higher prices
from later sales (Onumah, 2010). The stored grain was to serve as collateral to banks that
were reluctant to give loans to farmers due to lack of collaterals. Technoserve initially
started with maize deposits and later expanded to cowpeas, groundnuts and rice. The
programme covered a greater part of the country and was successful in maintaining
higher prices of maize for farmers and helped them to access credit (Londner et al.,
1999). In 1997, importation of maize into the country increased following policies of the
government, and depressing the local price of the commodity. The programme was not
sustained due to the small volumes of grains deposited by farmers (Kwadzo, 2000); and
high operational cost incurred by Technoserve (Coleman and Valeri, 2006).
In 2010, WRS was established by the Ghana Grains Council (GGC) with the aim of
improving the livelihoods of smallholder farmers in rural areas. GGC is a private sector
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organisation which comprises different stakeholders in the grain value chain. In
December 2012, the council launched the first Warehouse Receipt with financial and
technical support from United States Agency for International Development (USAID)
under the Ghana Agricultural Development and Value Chain Enhancement (ADVANCE)
project. In 2016, the GGC had five certified warehouses in the Northern region;
warehouses issue electronic receipts, with special security features. Total capacity of the
main warehouses is 21,500 MT (Table 1.1). There are nine approved community
warehouses in the Northern region of about 900MT total capacities (Table 1.2). Though
the community warehouses do not have the mandate to issue warehouse receipts, they are
able to manually issue “Goods Received Note” (GRN) to farmers. The GRN currently
cannot be used to access credit from formal financial institutions because it lacks
adequate security features. Farmers can collectively send grains aggregated at the
community warehouses to a certified warehouse for an electronic receipt which can then
be used to access credit from formal financial institutions and distributed to the
smallholder farmers who participate in the scheme.
Table 1.1: Certified Electronic Warehouses in the Northern Region of GhanaName of Warehouse Community District Capacity (MT)
Wienco Ghana Limited Dungu Tamale 18,000
Gundaa Produce Company Datoyili Tamale 500
Savanna Marketing Company Chahizihini Tamale 1,000
Busaka ABC Savelugu Savelugu 1,000
Shekina ABC Woribogu Kukuo Tolon 1,000
Total 21,500
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Table 1.2: Community Warehouses approved by Ghana Grains Council (NorthernRegion)
Farmers’ Group Warehouse Community District Distance from Capacity
No. Tamale (km) (MT)
Tiyumtaba CW013 Diare Savelugu 53.1 80
Tisongtaba CW014 Tamaligu Savelugu 56.3 80
Kpatinga CW015 Kpatinga Gushegu 95.6 80
Kpugi CW016 Kpugi Gushegu 130.36 80
Gaa CW017 Gaa Gushegu 86.9 80
Suglu Kumbo CW018 Shelilanyili Karaga 104.6 80
Kpandai cooperative - Kpandai Kpandai 181.0 100
Chamba cooperative - Chamba Nanumba South 165.3 100
Salaga cooperative - Salaga East Gonja 119.2 100
Total 780
The GGC in collaboration with Ghana Standards Authority (GSA), of the Ministry of
Trade and Industry (MoTI) have established grains standards and have expanded the
grades for maize. Between 2012 and 2015, about 29,000 MT of maize (average of
9,666.70 MT per year) was graded and stored under the GGC Warehouse Receipt
Programme. Over GH₵4.8 million of credit (average of GH₵1.6 million per year) was
obtained solely from Stanbic Bank Ghana Limited by grain depositors using 6,920 MT
graded grains (average of 2,306.70 MT per year) as collateral (GGC, 2015; Coulter,
2014).
In its efforts to increase reach of its services to many farmers in the country, GGC faces
challenges of low participation by smallholder farmers, inadequate regulatory oversight,
lack of legal framework that supports negotiable or transferable warehouse receipts,
smallholders’ limited knowledge on how the WR works, and low participation by
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financial institutions. The rest of the challenges are high transaction cost, high cost of
establishing and running warehouses, difficulty in finding suitable markets for receipts
and lack of suitable warehouses for certification. The warehouses can be private, public,
cooperative, government, or bonded. Public warehouses may be owned by individuals or
firms, but offer their services to the public. Private warehouses are owned by firms or
individuals who use the warehouses to finance their exports or imports, but do not accept
deposits from the public. Government warehouses normally hold food buffer stocks of a
country. Government warehouses can however operate as public warehouses to accept
deposits from the public. Cooperative warehouses are owned by a group of people such
as the farmer based organizations, processors association, or traders association. Such
warehouses are used to store goods of members of the association, and can be built by the
Local Government or District Assembly for the association, or built by the members of
the association themselves. However, warehouses can only be used in financing if they
meet certain conditions, and are certified by the GGC. It is therefore the responsibility of
the GGC to oversee and regulate the activities of the warehouses.
The oversight of GGC in the WRS is not a panacea to enhance the livelihoods of
smallholder farmers unless there is a conducive institutional environment and farmers are
linked to formal markets. The institutions will ensure free flow of market information to
farmers. Warehouse receipt system in Africa however lacks legal and institutional
framework to ensure its successful operation (KENFAP, 2011). Kelly et al. (2014), in
their study of institutional procurement of maize from smallholder farmers in Ghana note
that public organisations such as the Ministry of Food and Agriculture (MOFA) are
mandated to help improve agriculture, food production, provision of extension services
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and the development of FBOs. The Ghana Standards Authority (GSA) is responsible for
the grading of grains and establishes standards with respect to quality, weights and
measures. The work of these organisations as well as the local authorities under the
Ministry of Local Government and Rural Development and other financial institutions in
providing institutional support to WRS will be reviewed in chapter two. Other private
organisations such as Purchase for Progress Ghana (World Food Programme
intervention); the Savanna Marketing Company; and National Buffer Food Stock
Company (NAFCO) buy produce from smallholder farmers, especially members of
FBO’s and further facilitate marketing and linkages to other buyers.
Although WRS can improve access to market, access to credit, and increase income of
smallholder farmers, promotion in Africa has generally been slow. A study by Chitra
(2014) to identify factors influencing the use of warehouse receipts as a financial
instrument in Kenya shows that the majority of farmers (79%) in the study area were not
aware of the WRS. The system is mostly used by large processors, importers and
exporters to secure loans for their transactions (Coulter et al. (2013). WRS is unavailable
to smallholder farmers who suffer most from financial market exclusion due to lack of
collateral (Hollinger & Rutter, 2009). This is because warehouse operators place limits on
the quantity of grains that can be stored under the system (minimum of 50 bags or 5MT
in the case of Ghana). Onumah, (2010) argues that the experience of some developing
countries indicates that the system can be designed to allow direct involvement of
smallholders. In India, smallholder farmers participate in WRS directly by putting their
grains in warehouses possessed by the Central Warehousing and State Warehousing
Corporations. Smallholders have been directly involved in Niger, which enabled them
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access to inventory credit in the form of fertilizer. Smallholder coffee farmers in some
Latin American countries (example in Guatemala) also participated directly in the system
(Mahanta, 2012).
Ngare et al. (2014) observe that warehouse receipt system is much more concentrated
around ports and urban centres compared to the rural areas where price variability of
maize is prevalent due to lack of adequate storage facilities. Northern region of Ghana for
instance has five Ghana Grains Council certified warehouses to issue receipts. Three of
these warehouses are located in Tamale, the regional capital. Tamale is far (more than
50km) from the locations of the nine community warehouses. This makes it difficult for
the smallholder farmers to transport their produce assembled at the community
warehouses to the main warehouses for electronic receipts that will enable them access
financial services from formal financial institutions.
The grains stored at the community warehouses are not standardised and graded by the
Ghana Standards Authority. The grains are also not insured against potential loss by fire,
flood, or theft, as practiced at the main electronic warehouses. The current situation of
WRS in Ghana questions the extent to which access to credit, and output market as well
as income of smallholder maize farmers in the Northern region of Ghana are enhanced.
The major research question becomes: What is the impact of WRS on access to markets
and income of smallholder maize farmers in the Northern region of Ghana?
The specific research questions are:
1. What are the institutional arrangement for the successful operation of WRS in Ghana?
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2. What is the scope of promotional activities by the GGC and level of farmers’
awareness about WRS?
3. What are the perceptions of farmers about benefits of WRS to them and the
constraints they face in participating in the scheme?
4. How has the WRS changed the extent to which smallholder farmers obtain credit
from formal financial institutions?
5. What is the effect of WRS on market access of smallholder farmers?
6. How has the WRS influenced farmers’ income from the sales of maize?
1.3 Objectives of the Study
The major objective of the study is to assess the impact of WRS on access to markets and
income of smallholder maize farmers in the Northern region of Ghana. The specific
objectives are to:
1. Assess the institutional arrangement for the operation of WRS in Ghana.
2. Identify the scope of promotional activities and the extent of farmers’ awareness
about WRS.
3. Evaluate the perceptions of farmers about benefits of WRS to them and the
constraints they face in participating in the scheme.
4. Determine the extent to which WRS has influenced access to credit by smallholder
maize farmers in the Northern region.
5. Examine the effect of WRS on smallholder farmers’ access to maize markets in the
Northern Region.
6. Estimate the effect of WRS on incomes of smallholder maize farmers in the Northern
Region.
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1.4 Relevance of the Study
Analysis of the institutional arrangement for WRS provides information to help the
regulatory body to establish institutions that are lacking and also strengthen existing ones
that are weak to help make the WRS a success.
Description of GGC promotional activities to create awareness allows assessment of the
adequacy and effectiveness of the activities. Evaluation of the extent of farmers’
awareness about WRS helps to know which activity or communication channel that
effectively promoted the system to farmers. The regulatory body and policy makers can
focus resources on the effective activity in order to increase outreach of the programme
and minimize operational cost (Onumah and Acquah, 2011). Smallholder farmers’
understanding of how WRS works helps increase their participation in the community
WRS (Sahin, 2006). It also enables them to assemble adequate volumes of maize
required to earn them warehouse receipt at the electronic WRS level, thereby increasing
capacity utilisation and profitability of operating the warehouse.
Evaluation of farmers’ perceptions about benefits and constraints of WRS is important
information for policy makers, and learning on the depth of farmers’ knowledge
regarding the benefits of the WRS. Regulatory bodies’ strategy on awareness creation to
get more smallholder farmers to participate in the system becomes well targeted when
they have context specific information. Policy makers’ knowledge on the farmers’
constraints of WRS leads to development of appropriate measures to provide solutions.
When the system becomes more effective, it enhances the income of smallholder farmers
(Coulter, 2009).
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Most farmers sell their grains immediately after harvest at low prices due to lack of
adequate storage facilities or money for consumption smoothing (Onumah, 2010).
Knowledge on benefits of WRS in terms of increasing smallholders’ access to credit and
output markets makes it attractive to smallholder farmers to participate in the system.
That way, they stand the chance to have their grains well treated and graded to curtail
cheating on quality and weights by buyers at the local markets. Post-harvest losses are
reduced and farmers’ incomes improved.
The study provides evidence that a WRS introduces farmers to more reliable trading
relationships and further improves their incomes and profits, compared to traditional
commodity trading markets. Agriculture is thus considered a remunerative business for
smallholder farmers, which can go a long way to attract the rural youth to consider
farming as a viable life choice. When agriculture becomes a remunerative business
through warehouse receipt system, it reduces the perception of formal financial
institutions about smallholder farmers being high risk borrowers and improves their
chances of obtaining credits (IFC, 2014; Girabi and Mwakajo, 2013).
1.5 Organisation of the Thesis
The thesis is organised into five chapters. Apart from the introduction chapter, the
literature review is presented in the second chapter. Chapter Three discusses the
methodology for the research work. Chapter Four presents the results and discussion of
the study. The summary, conclusion and recommendations of the study are presented in
Chapter Five.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents a review of literature on other related studies to bring out
information on findings and empirical evidence that will make this study more relevant. It
begins with the review on promotional activities that best create awareness and adoption
of technology and innovative programmes by farmers. This is followed by the review of
how farmers perceive benefits and constraints of Warehouse Receipt System. The effect
of WRS on farmers’ access to credit from formal financial institutions, access to output
market, and income is also reviewed. Finally, the contribution of primary institutions
towards the development of WRS is also reviewed.
2.2 Promotional Activities to Create Awareness and Inform Adoption Decision
Promotional activities are used to propagate information to a particular group of people in
order to create awareness of a specific product. Information diffusion as defined by
Rogers (1995) “is the process by which an innovation is communicated through certain
channels over time among members of a social system.” Diffusion of information dwells
on four key elements: the technology or innovation itself, communication channels, time,
and a social system in which diffusion takes place (Rogers 1995).
Batz et al. (1999) explain that farmers make adoption decisions on the basis of utility
considerations. The probability that a farmer adopts a technology is a function of its
relative utility. Thus, comparing various technologies that are available, farmers will
adopt a technology if its utility exceeds that of other technologies or practices in the sense
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that it improves production and wealth or standard of living better than previous practice.
Morris et al. (1999) clarify that essential features of new technology that can promote or
discourage adoption include the complexity of the technology, its profitability, riskiness,
and compatibility with other technologies or practices. These features are carefully
considered by farmers and can influence adoption to a great extent. Time is important
asset in technology adoption process within which farmers seek knowledge about the
innovation in order to take a decision to adopt or reject it. The individual at this stage
continues to collect more information to review or confirm the earlier decision.
Awareness is defined as “the knowledge of existing phenomenon” (Simon et al. 2013, p.
557). Awareness is the first step in the technology adoption process. The spread of
information is the most important aspect of awareness creation of a specific innovation or
product to be adopted by farmers. Communication channels such as radio, newspaper,
magazine, television, slide shows, posters, hand bills, publicity vans, and extension
agents, are used to introduce new technology to farmers.
Rogers (1995) indicates that mass media is more effective in creating initial awareness in
the technology adoption process, but the adoption decision by farmers is more influenced
by interpersonal contacts. Thus, earlier adopters obtain information on new product or
innovation from outside and pass it on to other farmers in their social systems. The late
adopters however base their adoptions decision on the evaluation of the performance of
early adopters and thus rely more strongly on internal sources of information. Sahin
(2006) also suggests in a theory of innovation, that diffusion occurs among members of a
social system, and the adoption behaviour of one member influences the adoption
decision of another member. Similarly, Simon et al. (2013) believe that social media give
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scanty information about the new technology. However, it stimulates the interest of
farmers to seek further information about the technology through their social system.
An investigation of the communication patterns involved in the broadcasting of
agricultural innovations among rural farmers reveals that extension agents are better in
creating awareness and influencing adoption decision of farmers than mass media sources
Emenyeonu (1987). This is because extension officers combine information with farm
demonstration. Emenyeonu (1987) further argues that radio and television sets may not
work in rural areas where there is no electricity or where the people cannot afford them.
Towo and Kimaro (2014) in a study of smallholder farmers’ motives for participating in
WRS in Tanzania found that the majority of members in the study area (more than 90%)
were aware of the system, and more so among men than women. The reasons for
participating in the system include high price from delayed sales, access to credit and
access to output markets. The majority (70%) however joined to access loan from formal
financial institutions. On the contrary, a similar study in Kenya (Chitra, 2014) found that
the majority of farmers in the study area were not aware of the WRS. Farmers who had
knowledge about the system but were not participating explained that the legal provision
is not clear about who bears the cost in case of loss of the commodity or other
catastrophes on the commodities stored; besides farmers perceived that the storage
charges could rise beyond what they can afford. Awareness creation is therefore made by
conscious effort through the use of appropriate and cost effective channels, as well as
providing comprehensive information about the benefits, costs, and risks of the
innovation.
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2.3 Perception of Farmers about Innovation and its Influence on Adoption Decision
Van de Ban and Hawkins (1988) define perception as “the process by which information
or stimuli is received and transformed into psychological awareness.” Bennett and Hess
(2004) also define perception as “how one views or interprets things, and the angle from
which people view things.” Farmers’ decision to adopt or reject innovation is determined
by their perception about the innovation, which is normally linked to cultural and
traditional beliefs (Kalungu et al., 2013). Adesina and Zinnah, (1993) note that the
characteristics of a technology innovation strongly influence the perception of farmers to
adopt or reject it. Norton and Mumford (1983) also conclude that farmers finally decide
to adopt innovations when the perceived benefits outweigh the constraints. It is however
waste of resources if a newly developed farming technology is not used by farmers, no
matter how valuable it is. This is the reason why it is important to analyse farmers’
perception about an innovation or technology in order to enable researchers, extension
officers or other regulatory bodies to improve that innovation to meet the needs of
farmers.
Ndambiri et al., (2013) report that demographic and socioeconomic characteristics of
farmers such as age, education, farming experience, income, and distance to the nearest
market also influence the perception of farmers tremendously. A study by Kumar et al.
(2012) to understand the perception and attitude of farmers and agricultural firms towards
warehouse receipt financing show that farmers were reluctant to participate in the WRS
because they perceived that the system was only used by rich farmers, and traders in
market places as a tool for financing, but not applicable to the smallholder farmers. Also,
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Aikens et al. (1975) report that lack of access to capital or land could significantly affect
farmers’ perception and adoption decision.
2.4 Effect of WRS on Access to Credit from Formal Financial Institutions
Farmers’ access to credit is important to expand production and ensure continuous supply
of inputs to the farm. It facilitates agricultural mechanization and promotes economic
development (Nouman et al., 2013). Dittoh (2006) notes that access to credit is the major
problem of smallholder farmers in Northern Ghana where agriculture is the main
economic activity. However, financial services to smallholder farmers in rural areas by
formal financial institutions are hindered by problems such as high intermediation costs,
dispersed population, lack of track record and lack of suitable collateral (Onumah 2010).
Anang et al. (2015) indicate that access to agricultural credit in Northern Ghana is low
(40% of respondents have access) with small loan amounts (average of GH¢246.00).
Warehouse receipt systems can be a tremendous instrument for providing access to credit
to smallholder farmers (UNTAD, 2009)
Towo and Kimaro, (2014) disclose that WRS increases access to credit and plays a
remarkable role in facilitating agricultural activities and reduces poverty of rural farmers.
Access to credit is enhanced through the provision of database by the WRS that will ease
screening of borrowers by the formal financial institutions. The financial transactions of
farmers are therefore formalised, helping them to overcome the problem of lack of track
record. More importantly, the commodity stored in the system serves as collateral that is
acceptable by financial institutions for acquisition of loans (Onumah, 2003). Lenders can
therefore mitigate credit risk since this form of collateral is available and easier to
liquidate than most traditionally accepted assets. Similarly, KMP (2013) affirms that
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WRS makes it easier for lenders to monitor large number of borrowers by the help of
warehouse operators and collateral managers. This reduces transaction cost and
encourages commercial lending to the rural sector.
Commercial banks are the main participating lenders in a WRS. The warehouse receipts
obtained by smallholder farmers through their FBOs boost their confidence to seek for
loans from formal financial institutions. KMP (2013) asserts that warehouse receipt
financing enables banks to reach new sets of customers for financial services that they
usually find difficult to reach. This enables the banks to sell new products such as
insurance and loans to the farmers. Chitra (2014) however argues that most banks are
hesitant to accept warehouse receipts as appropriate collateral for loans. He concludes
that the willingness of banks to participate in WRS strongly depends on the legal
framework and successful operation of the system.
Hollinger and Rutter (2009) explain that banks that participate in warehouse receipt
finance often develop mechanisms that enable them monitor market trends and value the
loans properly. Formal financial institutions will initially be willing to give loans up to 55
to 65 % of the collateral value, and charge high interest rate. As confidence in the system
grows, the loan amount may increase to 80 % or even higher, with relatively low interest
rate. In order to increase the confidence of financial institutions in the system, Varangis
and Larson, (1996) reiterate that the value of warehouse receipts must be equivalent to
stored commodities. The quality and quantity of goods stored must be clearly stated on
the receipt. The rights, liabilities, and duties of all stakeholders must be clearly defined,
and there must be a performance guarantee for the warehouses. This guarantee affirms
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that the quantities and qualities stated on the receipt are the same as the stored
commodities.
Towo and Kimaro (2014) used both quantitative and qualitative methods to assess
whether warehouse receipt system has contributed in improving smallholder farmers’
access to credit. They found that WRS greatly enhanced credit access as they were
accepted by formal financial institutions. The other outcomes of smallholder participation
were improved farming technology, improved produce, and improved income. In a study
conducted by Mahanta (2012) to review warehouse receipt as an instrument for financing
in India, it was disclosed that warehouse receipts were issued by state warehouses for
lending purposes. In his study of warehouse receipts and securitization in agricultural
finance to promote lending to smallholder farmers in Africa, Onumah (2012) found that
WRS undoubtedly contribute to improving access to credit by smallholder farmers. The
paper suggests that the regulatory and legal issues be properly put in place to ensure
successful operation of the WRS.
Onumah and Acquah, (2011) conducted a study that sought to examine the outreach and
sustainability of inventory credit programme (ICP) in Ghana using both quantitative and
qualitative data between 1996 and 2003. They find that the outreach of the programme
got to the poor nationwide, with a depth of 25 – 47% measured in terms of loan size.
Findings further reveal that the ICP had a high loan recovery rate which made the
programme sustainable. These findings confirm the work of Kwadzo (2000) on inventory
credit: a financial product in Ghana, which found that the inventory credit scheme helped
over 100 farmer groups with loans amounting to over US$170,000 and almost 100 % of
the farmers repaid the loan.
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2.5 Effect of WRS on Access to Output Market by Smallholder Farmers
Smallholder farmers in developing countries have challenges in increasing production
and accessing remunerative output markets (Barrett, 2007). Smallholders are faced with
high input costs but low output prices due to fewer middlemen or buyers competing for
their produce. They also have weak access to supporting services such as market advice
and price information from institutions which together result in their inability to adopt
new technologies to expand production for the market (Wood, 2007). Omiti et al. (2009)
note that distance from farm to market centres is a major constraint to market
participation by smallholder farmers. Similarly, Coleman & Valeri (2006) establish that
transport constraints, which are linked to high costs of transport services, are important
reasons why smallholder farmers are unable to get their produce to formal markets to
obtain good prices.
Fafchamps and Gabre-Madhin (2006) attribute the lack of market access partly to poor
quality and quantity of goods being traded; this emanates from the absence of effective
systems of standard grades and measures. Similarly, Lauw et al. (2007) reveal that
smallholder farmers in South Africa are excluded from the main markets due to sub-
optimal production which is characterised by high production and transaction cost, and
poor quality making them less competitive. Balgah and Buchenrieder (2011) also
reiterate that the problem of market access by smallholder farmers is linked to
insufficient production and inability to meet desirable qualities and standards, which
makes it difficult to enforce contracts with buyers. Lyon (2009) concludes that
smallholder farmers in Ghana can create better access to market when they have access to
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market information, and develop trust based relationships with their buyers. Warehouse
receipt system (WRS) offers these services to farmers.
The WRS enables smallholder farmers to combine their produce through their
cooperatives or farmer based organisations for deposit in a certified or approved
community warehouse. This compels them to adhere to quality standards and minimum
quantity requirements. The guarantee of delivery by warehouse operators reduces the risk
of non-performance of trade contracts, ensuring trust of buyers in the system (DfID,
2009). This opens up smallholders to remunerative markets and increases their profit
margins. The system also ensures that buyers pay for the exact quality and quantity
described on the warehouse receipt (Gatachew et al., 2011). This avoids cheating of
smallholder farmers as normally occurred at informal markets. The development of
trusted delivery systems can also increase the hopes for successful operation of
commodity exchange markets (Onumah, 2010).
The WRS facilitates trade through reduction of the marketing chain and narrowed
distribution margins (Coulter & Onumah, 2002). The warehouses are used as delivery
points where trading takes place. This reduces transaction costs and information
asymmetry between market players and ensures transparent trade. In areas where
warehouses are networked nationwide, bearers of warehouse receipts are able to take
delivery of produce from a nearest licensed warehouse, and further minimises
transportation cost. In countries where the legal system support the warehouse receipt to
be used as a negotiable instrument, the receipt can be sold at any place, enhancing sight
unseen trade (Coulter, 2014). According to Chitra (2014), the WRS enables farmers to
deal directly with downstream buyers, and overcome asymmetric information within the
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market chain. This prevents the situation where farmers are chased by small number of
middlemen at the farm gate to buy at low prices.
Varangis and Larson (1996) observe that certain mechanisms need to be in place for
efficient operation of WRS to ensure output market access. First is a viable storage
facility and well trained warehouse operators. Two major problems hinder a successful
operation of a viable storage: government intervention whereby a fixed price is offered to
farmers during the crop year. This makes it unattractive to farmers who would have
stored their produce with the hope to get higher prices in future. Second, the high cost of
storage charged by warehouse operators discourage farmers from storing in the
warehouses. In order to ensure full participation of smallholder farmers in the WRS,
Onumah (2010) opines that market information systems need to improve to ensure
information on supply and demand, and the levels of inventories. FBOs and cooperatives
also need to be strengthened in order to enhance the possibilities of smallholder farmers
meeting the quantities and qualities required by the warehouse operators to obtain receipt.
KMP (2013) emphasise that a strengthened FBO enables individual farmers to be
educated on market behaviour and given the necessary tools to improve their businesses
and livelihoods.
Coulter and Onumah (2002) conducted a study on the role of warehouse receipt systems
in enhanced commodity marketing and rural livelihoods in Africa. The results they
obtained suggest that WRS, through the sale of standardised grains, curtails cheating on
weights and measures often suffered by smallholder farmers in the local market. The
WRS also moderates seasonal price variability, and promotes commodity marketing. A
study by Giovannucci and Varangis (2000) on warehouse receipts finds that warehouse
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receipt system eases access to credit and commodity market, reduces food losses, and
improves farmers’ income. Finally, a report by Katunze et al. (2016) on Uganda
warehousing receipt system confirms that actors in the WRS admit that the system boosts
market performance by increasing access to markets with high prices.
2.6 Effect of Warehouse Receipt System on Farmers’ Income
Coulter and Poulton, (2001) explain that farmers have low incomes from their farming
activities because they have have limited access to markets where good prices for their
produce could be obtained. Again, farmers lack good storage facilities where their
produce could be stored until prices appreciate before they sell. Consequently, they are
obliged to sell their excess produce during the harvest season, when farm gate prices are
low. Also, poor agronomic practices coupled with lack of credit makes it difficult for
farmers to obtain high yielding inputs that would help them increase productivity to raise
their incomes (IFAD, 2003).
Through participation in WRS, farmers obtain loans which enable them to acquire
adequate farm inputs to expand production and earn higher income. Farmers again have
access to storage facility that enables them postpone sales until prices are good. Post-
harvest losses at storage are also minimised through the proper storage procedures by the
WRS. Kiaya (2014) emphasises that post-harvest grain management, through proper
treatment and storage practices, are essential to minimising losses and increase farmers’
income.
WRS also introduces farmers to formal markets, where goods are sold at good prices for
higher income. Such markets also reduce transportation cost since goods are delivered at
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the warehouses (Hollinger and Rutter, 2009). The goods are also standardised and
graded. Farmers therefore obtain the right prices for their produces without being cheated
on quality, weights and measures.
A report by IFAD (2012) acknowledge that in Tanzania, prices of grains appreciated up
to 300 percent after the establishment of WRS. The report explained that the WRS
enhanced farmers’ credit accessibility and improved the quality and quantity of their
produce for better prices. This raised farmers’ income tremendously and enhanced their
livelihoods. Similarly, Coulter (2014) in his study on appropriate warehousing and
collateral management systems in Sub-Saharan Africa, finds that WRS increases farmers
income by:
- Enhancing farmers’ access to inputs, equipment, or advisory services that lead to
increase in productivity
- Providing better storage facility and crop handling techniques that minimises
post-harvest losses at storage
- Developing grain standardization and grading systems that attract high prices for
produce
2.7 Institutional Arrangement for the Successful Operation of WRS
Hodgson (2006) defines institutions as systems of established and prevalent social rules
that structure social interactions. Institutions are essential for the development of every
economy; they control economic behaviour and reduce the cost of transaction between
actors engaged in economic activity in order to promote productivity (Williamson, 1985).
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North (1990) reiterates that institutions are developed to ensure order and minimise
uncertainty in exchange.
Warehouse receipt systems (WRS) can only be successful in ensuring smallholders’
access to credit and output market when legal and institutional framework are in place.
Uganda is one of the African countries with successful operating WRS. After the
establishment of WRS in Uganda through the Ministry of Trade, Industry and
Cooperatives, it was supported with strong legislation (Warehouse Receipt System Act
2006, and Warehouse Regulations 2007). The legislation enabled the warehouse receipts
to be used as negotiable instruments that helped to build trust and confidence among
stakeholders (IFC, 2013). The legislation again enhanced the work of the regulatory body
to properly control all activities of the WRS. Inspection intelligence of the regulatory
body helps in dispute resolution that are emerged from quality and quantity issues.
Conversely, financial institutions in Zambia are uncertain to lend against warehouse
receipts because the receipt is not backed by law to be used as a negotiable instrument
(Andrews et al., 2012). Onumah, (2010) admits that lending against warehouse receipts is
possible in a situation where there is poor or no legislation. However, transaction cost is
higher in such situations, and banks often hesitate to approve the transactions. Thus, bank
risk managers and credit committees are more comfortable to lend in an environment
where there is strong legislation in place. The Federal Reserve of United States as well as
the Bank of England in United Kingdom have low interest rates for loans contracted with
warehouse receipts, since it is backed by legislation (FAO, 1995). Other countries such as
Hungary and Slovakia have specialized warehouse receipt legislation for their WRS.
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Lending institutions in such countries prefer to accept warehouse receipts from
warehouses that are backed by insurance services or indemnity fund.
Again, a well organised and dependable market information system is essential for all
stakeholders in WRS to make informed decisions on when to deposit or sell grains.
Market information and price projections also enable banks to determine the value of
collaterals and structure loans accordingly. This is possible in countries where there are
well developed commodity exchange market systems.
According to North (1990), institutions play five potential roles in strengthening markets
for commodities produced, bought, and sold by small-holders. These are, reducing
transaction costs; managing risk; building social capital; enabling collective action; and
redressing missing markets. These are discussed in the following sections.
Reducing Transaction Costs:
According to Aoki (2001), the role of institutions in reducing transaction cost can be well
understood from the point of complexity of market exchange. Coordination is essential in
market exchange where actors do negotiation, monitoring and enforcement of contracts.
These activities involve costs that can be reduced when institutional arrangement ensures
adequate flow of information. Access to information encourages sight unseen trade and
reduces transportation cost.
Managing Risk:
Risk in economic activities such as financial or commodity market emerges when there is
lack of trust among actors or stakeholders engaged in transactions. A proper institutional
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arrangement that clearly defines roles and obligations of all actors promotes trust and
reduces risk. A legal framework puts confidence in all stakeholders and ensures
enforcement of contracts.
Building Social Capital:
Social capital refers to “the internal social and cultural coherence of society, the norms
and values that govern interactions among people and the institutions in which they are
embedded” (Serageldin, 1998). Social capital is not only about the institutions that
underpin society, but also the bond that holds them together. It includes rules for social
conduct, shared values, personal relationships, trust, and civic responsibility that make a
society more than a collection of individuals. It is the building of social capital that drives
formation of local associations and collective action. There is evidence that local
associations and networks contribute immensely to development of a society and the
well-being of households (Woolcock, 1997). The building of social capital enhances
information flow and transfer of knowledge in a society. Social capital promotes demand
driven and bottom-up approach of development.
Enabling Collective Action:
In the perspective of globalisation and market integration, smallholder farmers, compared
to large commercial farmers, are often at disadvantage due to lack of information,
essential services, capital, poor quality produce, and unfavourable government policies
(Kalikoski and Franz, 2014). Farmers may also be excluded from decision making or
governance in matters that directly or indirectly affect their well-being. Farmers’
collective action approach has been suggested as a vital solution.
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Collective action is defined as voluntary action taken by a group to pursue common
interests or achieve common objectives (Meinzen-Dick and Di Gregorio, 2004).
Members of an organisation may act independently or with the support of external bodies
such as governmental or non-governmental organisations for a common goal. In Bolivia,
Ecuador, and Peru, collective action led to team work, social networks, knowledge
sharing and interpersonal trust that promoted market participation by smallholder
farmers, business contacts, and newly improved production processes (Devaux et al.,
2007).
Redressing missing markets:
Gabre-Madhin (2006) suggests five important ways of redressing missing market in an
economy: capacity building throughout the marketing systems, including small and
medium private traders, and cooperatives or FBOs; ensuring competitiveness among all
market actors; reduction of risk through mechanisms such as transferable warehouse
receipts or other negotiable instruments; financial institutions meeting the financial needs
of traders and producers; and provision of dispute settlement and regulatory systems such
as trade associations.
Torero (2011) confirms that any organisation that connects farms to market, minimises
transaction costs and reduces risk will enhance smallholder farmers’ market participation.
Ministry of Food and Agriculture; Ministry of Trade and Industry; Ghana Standards
Authority; Ministry of Local Government and Rural Development are the public
organisations whose institutional support is primarily required to influence the
performance of WRS in Ghana. The private organisations are financial Institutions, and
the Ghana Grains Council.
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2.7.1 Responsibilities of the Ministry of Food and Agriculture (MoFA)
The Ministry of Food and Agriculture operates with a mission to promote sustainable
agriculture and thriving agribusiness through research and technology development,
effective extension and other support services to farmers, processors and traders for
improved livelihood. It has the mandate to develop and implement policies and strategies
for the agricultural sector in order to enhance food production, planning and co-
ordination of development projects in the agricultural sector and, monitoring and
evaluation of the projects and programmes established to assess their progress. In 2012,
MoFA formed a national task force charged to help develop a reliable warehouse receipt
system (Coulter, 2014).
Through its policies such as Food and Agricultural Sector Development Policy (FASDEP
II), MoFA has the following objectives:
- Improve food security and readiness for emergencies
- Improve the coordination of institutions
- Improve growth of incomes of farmers
- Increase the application of science and technology in food and agricultural
development
- Increase competiveness and integration of farmers into domestic and international
market
- Enhance sustainable management of land and environment
Through its regional offices and Departments of agriculture at the district level, MoFA is
responsible for providing extension services to farmers, and helping them develop farmer
based organizations (FBOs). Formation of FBOs can enable farmers to use warehouse
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receipts to store their produce in order to sell them in the lean season when prices are
high. Lessons learnt from Tanzania in that country’s operation of WRS reveals that
farmers benefit most when the aggregation, depositing and marketing are done by the
FBOs instead of second or third party representatives (Onumah, 2010).
2.7.2 Responsibilities of the Ministry of Trade and Industry (MoTI)
The Ministry of Trade and Industry is responsible for the formulation, implementation
and monitoring of trade in Ghana. The Ministry is also responsible for private sector
development. It uses its departments and agencies to ensure successful operation of
domestic trade to benefit the country. To achieve this aim, the sector Ministry is
mandated to provide adequate market information to all stakeholders in the marketing
chain. This can be done through regular publication of prices of traded crops; supply and
demand, including timely crop forecasts. Such information enables farmers to have a fair
idea about the best time to sell. It also helps financial institutions to assess the market
value of a particular crop in its collateral considerations, during processing of loans
(Krassimir et al., 2007). KENFAP (2011) acknowledge that access to reliable market
information is essential for successful operation of a WRS. It boosts the confidence of
financial institutions in the system, and aids trust building among actors in the system. In
2012, MoTI established a National Technical Committee for the development of
commodity exchange market and its supportive warehouse receipt system. The work of
the committee led to the drafting of two legislative instruments that are before parliament
(Coulter, 2014).
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Through appropriate policies, the Ministry of Trade and Industry is also responsible for
curbing excessive food price variability. It does this by management of imports; adoption
of anti-monopoly legislation and other regulations to protect consumers; and expansion
of internal trade to ensure availability of goods at reasonable prices. Giovannucci et al.
(2000) argue that general price increment after harvest season is essential in the WRS, in
order to cover the cost of storage. This also makes delayed sale attractive to farmers and
enables them obtain high benefit. Government intervention to protect the market inhibits
the smooth operation of WRS.
Core Functions of MoTI
- To formulate policies that ensure collaboration of all sectors in trade relations
- To ease access to capital by the private sectors
- To facilitate innovation and entrepreneurship
- Improve entrepreneurial skills, use of technology and access to credit and markets
- To develop programmes and activities for capacity building of market institutions
- To develop standards and quality systems to meet production requirements for
local and international markets
- To enhance production and expansion of cross-border trade
- To collect and disseminate timely and accurate market price information for
stakeholders
- To ensure private sector development
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Ghana Standards Authority (GSA)
The Ghana Standards Authority is an agency of the Ministry of Trade and Industry. It
was issued as the Standards Decree, 1973 (N.R.C.D. 175), and was established to
propagate standards and ensure high quality of goods produced in Ghana, whether for
local consumption or for export. The authority, as part of its functions, has the mandate to
educate government departments, local authorities and any other public bodies on matters
concerning standardisation and commodity grading, with respect to quality, weights and
measures. Giovannucci et al. (2000) emphasise that quality standards and grades are
important in the WRS in order to give a precise description of the quality of goods in
storage to buyers, without the need to physically inspect the goods. Grading and
standardisation of grains stored in the WRS is also essential to allow comingling of goods
and ensure that farmers withdraw the same quality of commodities as deposited. Grades
and standards further makes it easier for financial institutions to evaluate grains used as
collaterals and determine their value (Krassimir, 2007).
The GSA is mandated by the legislation to undertake:
- National Standards development and distribution
- Promoting standardization in industry and commerce
- Promoting standards in public and industrial welfare, health and safety
- Product certification scheme
- Approval of new weighing and measuring instruments
- Destination inspection of imported high risk goods
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- Calibration, verification and Inspection of Weights, Measures and Measuring
Instruments
- Advice the Ministry of Trade, Industry, on standards and related issues
- Providing quality assurance through inspection, testing and metrology
2.7.3 Responsibilities of the Ministry of Local Government and Rural Development
The Ministry of Local Government and Rural Development, as part of its rural
development agenda, is responsible for the construction and maintenance of rural roads;
Information and Communications Technology; Tourism and Agricultural processing; and
Building of market settlements with warehouses. It is also in charge of improving the
capacity of communities and local government institutions to organise, and manage
resources for accelerated rural and urban development. The Ministry is therefore
responsible for development of rural road networks to link areas of food production to
markets and warehouses.
Since the Ministry also houses agricultural departments, they see to the implementation
of policies and interventions that are brought from national and regional MoFA offices.
The agricultural departments are therefore in charge of providing extension services to
farmers in rural areas, and building of community warehouses as social intervention
programmes to minimise post-harvest losses and to facilitate the operation of WRS. The
enhancement of information and communication technology is also imperative for the
operation of financial institutions in the rural areas, to enable smallholder farmers gain
access to financial services through the WRS.
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2.7.4 Responsibilities of Financial Institutions
Access to financial services is the main reason for the establishment of warehouse receipt
system (Towo and Kimaro, 2014). The role of local banks is therefore significant to
successful operation of WRS. In order to ensure sustainable delivery of services to
participants of the system, bank staff need to be trained to follow established internal
procedures, including monitoring of prices of commodities in stock that are used as
collateral. Lenders should also have the ability to determine the existence of the
commodities in stock, in quantities and qualities as stipulated on the receipt before
granting the loan. Hollinger & Rutter (2009) reveal that the Federal Reserve of United
States and the Bank of England have special discount windows for loans that are
contracted with warehouse receipts. This is because the commodities used as collateral
are stored outside the premises of the borrower, making it easier to foreclose in case of
default.
In order to increase the acceptability of warehouse receipt by traders and banks, there
must be an insurance cover for warehouses that provides compensation for actors in case
of any catastrophe. Experience on performance guarantees designed for Poland is a
combination of insurance bonds and an indemnity fund. The indemnity fund, which is
given in the form of a contingent loan, is set up by the participating enterprises or
farmers. The insurance bonds cover losses up to a certain threshold beyond which, the
indemnity fund comes in to assist (Giovannucci et al., 2000).
In Ghana, four banks are stakeholders of the WRS. These are, Ecobank Ghana Limited,
Agricultural Development Bank, Stanbic Bank, and CCH Finance Limited. Lending to
the patrons of the WRS to date has been solely by Stanbic Ghana Ltd., through the CCH
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Finance Ltd. Repo scheme (Coulter, 2014). The lending involves high interest rate,
ranging from 20% to 48% per annum. Cost of insurance policies range from 0.7% to
1.5% of the insured value, depending on the assessment of risk by the insurance company
(Coulter, 2014).
2.7.5 Responsibilities of the Ghana Grains Council (GGC)
The warehouse receipt system in Ghana was established by the Ghana Grains Council. It
is a private sector organisation limited by guarantee and was incorporated in February,
2010. GGC is mandated as the principal regulatory body responsible for the
administration, interpretation, and enforcement of the regulation of the WRS. The
specific objectives of GCC, as explained by Kelly et al. (2014) are to, advocate for
favourable government policies and legislations in the grains sector; develop a warehouse
receipts system that can certify and enforce agreed standards in the grains industry;
increase quality, productivity and profitability in the grain value chain; ensure the
dissemination of market price information; and ensure institutional sale of standardized
grains.
It is the responsibility of the GGC to license any person who participates in the WRS.
Four types of licenses are currently used by the Council: i) License for Warehouse
Constructions, ii) License for Warehouse Operators, iii) License for specialised staff
employed by Warehouse Operators including graders, weighers, and grains inspectors
and iv) License for Warehouse Inspectors.
Through the warehouse inspectors, the GGC is mandated to check all the warehouses to
make sure they are in good condition, and the warehouse operators, and all the handlers
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follow laid down procedures. In order to make the warehouses accessible to various
depositors and traders, the GGC is responsible for establishing a national network of all
warehouses as piloted in Zambia (Coulter, 2014). The council is also mandated to involve
more financial institutions in the system to facilitate financing to smallholder participants
in the system.
A few authors have conducted researches on the Technoserve inventory credit scheme in
Ghana. There was a study by Onumah and Acquah, (2011) that examined the outreach
and sustainability of the inventory credit programme (ICP) in Ghana using both
qualitative and quantitative data between 1996 and 2003. The study disclosed that the
outreach ICP was extended to the poor with a depth of 25 - 47% (nationwide) measured
in terms of loan size / GNP per capita. Kwadzo (2000) also conducted a research on
inventory credit: a financial product in Ghana. The findings of the study revealed that the
inventory credit scheme assisted over 100 farmer groups with more than US$170,000
loans and almost 100 % repayment rate.
Coulter (2014), in his study on appropriate warehousing and collateral management
systems in Sub-Saharan Africa (Volume I) touched on progress made so far on the Ghana
Grains Council’s WRS. However, no work has been done to assess the impact of Ghana
Grains Council’s WRS on access to credit, access to output market, and income of
smallholder maize farmers in the Northern region of Ghana. This study therefore seeks to
fill that gap in order to contribute to knowledge.
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CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter describes the methodology used to accomplish the objectives of the study. It
specifically deals with the conceptual framework, theoretical framework, methods of data
analysis and methods of data collection. The characteristics of the study areas and the
population that informed the calculation of the sample size are also described. Finally, the
limitations of the study are also presented.
3.2 Conceptual Framework
The conceptual framework for the research is illustrated in Figure 3.1. The study
conceptualises participation of smallholder farmers, institutional support services and
enabling environment as integral factors for successful operation of Warehouse Receipt
System (WRS). The Ghana Grains Council (GGC) works in close collaboration with the
public organisations to formulate policies and establish institutions needed for the
successful operations of WRS in Ghana. Institutional support such as enabling policies
and legislation, grain standardisation and grading, and market information systems
sanitises the environment for the WRS and provides fertile grounds for stakeholders to
operate. The GGC which is the regulatory body of WRS entices smallholder farmers to
participate in the WRS through its promotional activities. The GGC also provides license
and technical advice to the warehouses and their operators. The GGC and public
organisations take feedback from the warehouses and in order to strengthen the
institutions.
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The capacity of smallholder farmers to participate in WRS depends on the quality and
quantity of output (KENFAP, 2011). It is therefore important for smallholder farmers to
combine their produce with other farmers through farmer based organisations or
cooperatives at the community warehouses system. This enable the farmers to obtain
adequate quantities of output required to earn a warehouse receipt (WR) at the electronic
warehouses and also benefit from other support services such as research and extension,
market information, and financial services.
CERTIFIED WAREHOUSE
Maize Storage WR
Access to Credit WR
Financial InstitutionMarket Access
Maize Cash PaymentBuyer
WR WR
Figure 3.1: Conceptual framework for the activities and functions of WRS.Source: Adapted from Onumah (2012)
The access to storage facilities in WRS reduces post-harvest losses and allows farmers to
extend sales period beyond the harvesting season for higher commodity price. The
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warehouse receipt obtained from the electronic warehouse is used as collateral against the
commodity in stock to access credit from formal financial institutions which are shared
among the individual participating farmers. The credit is used to acquire quality inputs to
improve farming activity which helps to increase productivity. The improvement in
productivity paves way for farmers to access formal market (Towo and Kimaro, 2014).
Increased productivity and high price from later sales enable farmers to improve their
income tremendously.
In a situation where farmers, through their FBOs, pledged their WR to obtain credit from
a lending institution, buyers who wish to buy their grains have to pay directly to the
lending institution to obtain the receipt. The WR is then taken to the warehouse to
retrieve the grains. Legal framework and the establishment of commodity exchange
market are essential to make the WRS attractive to financial institutions and other
stakeholders to participate in the system. Legal framework also defines the context of
operation of WRS. Good management and regulatory oversight are necessary to enable
all actors play their roles to ensure sustainability of the system.
3.3 Theoretical Framework
This section discusses the theories of storage, access to credit, access to market, and the
theories of perception about innovations and how they are linked to participation of
warehouse receipt system (WRS). The theories of impact analysis are also discussed here.
3.3.1 Theory of Storage and Inventory Management
Thurman (1988) in his theory of storage admits that the future price of a stored grain is
expected to exceed its price soon after harvest, but there will be a storage cost incurred.
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The theory strongly argues that the returns from later sales of grains should depend on the
level of inventories. This is because inventories can be used to avoid supply or demand
shock. When the level of inventory is large, returns from later sales will decrease due to
increase in quantity supplied and vice versa. This theory is consistent with the assertion
of Williams and Wright (1991) that the producer price of grains immediately after harvest
can be low or high depending on the level of inventory. When inventory soon after
harvest is large (when few of those commodities are stored) leading to increase in the
quantity supplied, spot price of the commodity will be depressed leading to low income
of farmers. On the other hand when most farmers store their grains after harvest, spot
price will be high due to decrease in quantity supplied which will lead to increase in
income.
Inventory management is an essential part of public warehousing which may determine
the success of the whole business. Inventory control involves keeping records and
accounting for the grains that are brought, stored, and taken from the warehouse. Grains
lose weight at storage due to loss of moisture and removal of chaff. The best practice is
therefore to make upward adjustments during weighing in order to make room for the
cleaning and moisture loss. Again, a good inventory management includes monitoring a
number of activities, including minimization of handling losses and mitigating theft
incidence.
3.3.2 Access to Credit
Access to credit, is defined here as absence of price or non-price barriers in the use of
credit from financial institutions (Bougheas et. al, 2004). Access to credit can be
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explained by certain indicators that may facilitate or reduce access, as explained by
Anjali (2005). First, the indicators distinguish between the users of credit and non-users.
Second, access can be measured in terms of financial institutions and their financial
services with respect to specific financial products. Third, measurement may depend on
the total amount obtained from the financial institution; whether it is adequate for the
purpose for which the credit was taken. Finally, access may be measured based on the
individual’s direct access from the financial institution or indirect access through a
member of household who may take loan and share among other members who need it.
Non-users of credit are those who have access, but choose not to take loans due to
cultural or religious reasons or because they do not need it. Others are unintentionally
excluded from taking credit from formal financial institutions because they do not have
bank accounts that provide details of track records. However, others might be
discriminated against in giving credit based on social, religious, gender or ethnic grounds.
Some people have bank accounts but may not be credit worthy. In that case, no bank will
be willing to give them loan facilities (Towo and Kimaro, 2014).
Access to credit can also be measured in terms of availability of financial institutions and
the specific functions or services they provide (Oya et al., 2012). Certain banks do not
offer loans to agricultural producers because they consider farming a risky venture.
Others, by their policies, give loans to agricultural producers but might not have branches
in the rural areas where farmers are concentrated. This is because the operational cost in
reaching out to such people might be too high due to lack of infrastructure such as good
road network, electricity and telecommunication facilities.
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Finally, the interest on loans might be too high for farmers due to high transaction cost on
the part of the financial institutions. Apart from high operation cost that emanates from
poor roads and lack of other infrastructure, the dispersed nature of rural population and
lack of proper data and track records of farmers increase the interest rate on loans to
farmers. This makes it unattractive to farmers to access credits from such banks. Those
who may be willing to take loans may lack assets that might be accepted by banks as
collaterals (Towo and Kimaro, 2014).
Access to credit may also be measured based on the household as a unit or individuals in
the household. But the demographic data of individuals in a household will be lost if the
household is used as a unit of response (Barr et al., 2007). It must also be noted that if
one member of a household has direct access to credit, it does not necessarily mean that
all members in the household have access. However, it is important to measure indirect
access to credit by an individual through another member of the household. This is
because one member of a household can take a loan and share it with members of the
household who may need it. Nevertheless, this study measures individual direct access to
credit from formal financial institution and not the household.
In addition to the core indicators discussed, additional indicators that affect financial
access by smallholder farmers as suggested by Beck et al. (2005) include insurance,
regular cash flow, savings with a formal financial institution, living in a locality of
mobile phone coverage as well as farmers receiving money regularly (e.g. remittances)
through formal financial institution.
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3.3.3 Access to Market
Financial position of farmers does not only depend on their access to credit from financial
institutions, but their ability to obtain higher incomes when they gain access to output
markets. As described by Sadoulet and De Janvry (2010), farmers in rural areas are
poorer, less productive, and less linked to urban markets. Market access is broadly
defined as all determining factors, including public institutions, the regulatory
environment, and network industries that jointly remove all barriers and facilitate sale of
goods and services (Hugo et al., 2006). In their attempt to define what constitute barrier
to market access, Chamberlin and Jayne, (2013) explain that smallholder farmers are
faced with higher cost of farm inputs but lower output prices, limited access to supporting
services which result to inability of farmers to adopt new farming technologies, low
productivity, and fewer buyers competing to buy produce of farmers.
Access to market has been hindered by bad road networks, costs of transportation, travel
time to urban markets, among others. Overa (2006) indicates that telecommunications
technology such as the use of mobile phones prevents information asymmetry over
dispersed areas. Mukwevho and Anim (2014) identify transaction costs, agricultural
extension education, level of formal education of farmers, distance of farm or home to
market, and farming equipment owned by farmers as highly significant variables that
influence the market accessibility of farmers. Neven et al. (2009) find that farmers who
supply food items to markets were all within 100 km of the urban centre and close to
major road networks. Travel times to market, road networks, and bus services have also
been found to be correlated with market access.
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In order to establish the range of market access indicators used in current research,
Chamberlin and Jayne (2013) also identity walking time to local market, distance in
kilometers, cost of transport of a bag of maize to the market, and good road networks.
Coulter and Onumah (2002) disclose that warehouses are used as delivery locations in the
warehouse receipt system (WRS) thereby saving farmers the cost and time of travelling
to local or urban markets to sell. The standardised and graded grains stored in the WRS
promote sight-unseen trade. Warehouse operators also provide information on the
quantity and quality of grains available, and this attracts buyers to buy from the
warehouses.
Smallholder farmers who give out their labour to work in other farms instead of
concentrating on their own farms often reduce their productivity (Ferris et al., 2014).
Barham and Chitemi (2009) also suggest that farmers linked to larger markets have
access to irrigation facilities and do not solely depend on rain fed environment. This
enables such farmers to have increase in production even in drought season. Membership
of farmer base organisation enhances social interaction of farmers. This facilitates
diffusion of information and sharing of ideas. Access to market information, which can
also be facilitated by communication technology such as mobile phones, enables farmers
to adequately prepare to meet the required quality and standards of the market (Ferris et
al., 2014). Distance to main market, available road networks, condition of road, access to
transport services, and transport cost are included because they determine the time of
getting goods to market and meeting the demands of buyers as scheduled. Already
established business relations by farmers also facilitate sales of commodities.
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3.3.4 Theory of Perception
The Reflexive Theory of Perception (RTP) asserts that perception by an organism about
an object is caused by the characteristics of the same object which makes the organism
acquire some mind-set towards the object (Dilworth, 2005). This theory implies that any
perceptual behavior of an individual about an object, whether correct or incorrect, is
caused by the kind of information acquired by the individual on the object. The theory
pre-supposes that individuals develop positive perceptions about innovations or
programmes such as warehouse receipt system (WRS) when they obtain adequate
information concerning the benefits of the innovation during the promotional stage.
Conversely, individuals develop negative perceptions about an innovation when they
obtain wrong or negative information.
Act theory of perception has a different view about the perceptual behaviours of
individuals. According to this theory, perception has a cause, meaning, and can be
interpreted (Fields, 2013). The theory explains that individuals may exhibit perceptual
behaviours based on the kind of information obtained (causal process). However, the
information obtained might be misinterpreted due to wrong meaning acquired, and might
result to misperception.
On the other hand, representationalist theory states that individual’s perceptual behaviour
might not be influenced by any external cause. The theory clarifies that individuals have
their own brains which are used to logically interpret what they see or hear. The
perception of such people might therefore not be the cause of positive or negative
information obtained. The theory signifies that the perception of farmers about a
programme such as WRS might not necessarily be based on the kind of positive or
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negative information they acquired. The perception may rather base on the result
obtained when the information is analysed based on evidence from previous programme
they participated or witnessed.
There is other school of thought, as explained by the disjunctive theory of perception.
According to this theory, there are two basic natural beliefs about perception of objects.
The first is that, every object perceived is independent on the mind of that individual who
perceives it (Martin 2002). Therefore, the judgment of innovation, whether positive or
negative, solely depends on the nature of the innovation perceived without comparing it
to any other programme thereof. This implies that for an innovation such as WRS to
enjoy positive perceptions by farmers, it should be well designed to attract the farmers.
The second natural belief is the linkage between the nature of the object perceived and
the perceptual experience of the individual in question. The second conviction is similar
to the representationalist theory which suggests that when an innovation is presented to
an individual, the innovation is compared to a similar programme formally experienced
by the individual, which therefore influences the perceptual behaviour.
3.3.5 Approaches and Framework of Institutional Analysis
Approaches used in system analysis in marketing include; Agricultural Science
Technology Innovation (ASTI) systems (CTA, 2015), Institutional Analysis and
Development (IAD) (Ostrom, 2011), Value Chain Approach (Porter, 1985), and Agro-
Industrial Project Analysis (Austin and Duren, 1993).
IAD framework involves (1) exogenous variables which include physical environment or
action situations, characteristics of communities, and the legislation or rules governing
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the operation of human activities; (2) actors whose activities are affected by the
exogenous variables; (3) and the behaviour of actors in the environment or action
situation that are expected to achieve specific results (Ostrom et al., 1993). The kind of
results that obtained helps to shape the exogenous variables and the situation of the
actors.
The first step in analysing institutional arrangement of a particular project by the IAD
approach is to identify the environment or action situation that could be used to explain
or describe behaviours within the institutional arrangements (Ostrom, 2011). The action
situations are the social systems where individuals operate, share ideas, market their
products, and solve problems, among others. The operation of actors (individuals or
organisations) within the action space or environment is shaped by the resources
available to them, how they obtain knowledge and solicit for information, and how the
knowledge attained is applied to solve specific problems.
Depending on the state of action situation and the particular assumptions about actors
employed in a given project, an institutional analyst can make predictions of possible
outcomes under different institutional arrangements (Walker and Ostrom, 2009).
Some of the theories that are considered in the IAD approach are the economic theory,
game theory, social choice theory, and transaction cost theory (Ostrom, 2010). The game
theory is about how individuals in a society interact with one another, and how their
behaviours positively or negatively affect one another, in the context of institutional
arrangement. The game theory operates on the assumptions that individuals are rational
and given a well-defined objectives, they will act in a manner that their behaviours will
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not negatively affect the other. The game theory is therefore defined as “a systematic
study of strategic interactions among rational individuals” (Kockesen and Efe, 2007, p.
8).
Transaction cost theory (TCT) explains that there are costs involved in operations
through the market that can be reduced through other instruments apart from markets
(Williamson, 1985). Some of these costs come as a result of negotiation, information
acquisition, and assessment of input, measurement of output, monitoring and
enforcement of contracts. The TCT operates on several assumptions such as the
assumption about human and human behaviour (opportunism with guile and bounded
rationality); and assumptions about environmental characteristics (asset specificity,
uncertainty and frequency of transactions). The economic theory looks at how such
assumptions are reasonably related and the conclusions that can be obtained from them.
These theories and assumptions are considered in the IAD approach of institutional
arrangement.
3.3.6 Theory of Impact Analysis
The theory of change is essential for impact evaluations. The ‘theory of change’ explains
how specific activities lead to specific outputs, and how specific outputs lead to specific
outcomes that contribute to attaining the ultimate impacts (Rogers, 2014). Understanding
the social system, political and economic setting in which an intervention occurs helps to
design an appropriate impact estimation method. This is because the impact of similar
interventions can vary in different environment due to variations in social, political and
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economic settings. Again, the programme environment also helps to anticipate probable
impact heterogeneity, which is usually considered in the computation of the sample size.
Evaluation of impact of an intervention is conducted using a suitable counterfactual, in
reference to a control group in order to prevent selection bias and spillover effects
(Asfaw, 2010). It is important to employ different forms of factual analysis to
complement the counterfactual estimation of impact. Targeting analysis is the common
form of factual analysis which ought to be considered in most impact evaluations. There
must be a defined target group in impact analysis in order to easily identify targeting
errors and their sources; and whether such errors can be quantified.
Impact analysis in most studies have employed single econometric models such as
correlated random effects (CRE), double hurdle, and other fixed effect models (Smale &
Mason, 2013). However, the estimates of single models are not robust because each has
its own limitations which cannot be rectified individually. This study uses endogenous
switching regression model (ESRM) for the analysis. The result of the ESRM is
confirmed by another result from propensity score matching (PSM).
ESRM corrects any potential endogeneity and sample selection bias which may arise
from other interventions for farmers (Alene and Manyong, 2007). PSM is used in the
study because it compares the observed outcomes of participants of a programme to the
outcomes of counterfactual non-participants (Heckman et al., 1998). PSM ensures that
any interventions earlier made that could have affected the outcome variable are balanced
between the treated and untreated parameters (Abadie, 2005). It can also reduce the
overall bias in estimating differences in treated and untreated parameters.
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3.3.6.1 Endogenous Switching Regression
ESRM is an econometric model used to analyse a decision process that involves choice of
an option. It is used in the estimation of treatment effects when there is non-random
allocation of subjects to treatment and non-treatment groups (Alene and Manyong, 2009).
Suppose that we consider a latent continuous variable Y* that is normally distributed
with mean µ and variance σ2. The standard Tobit model is given by
Y* = Xβ +εY = Y* if Y* > 0
Y= 0
if Y* ≤ 0.
…………………………………………..………… (3.1)
Modeling of the impact of WRS on access to credit, output market and crop income
under the ESRM framework proceeds in two stages: The first stage is the decision to
participate in WRS (Equation 3.1), and this is estimated using a Probit model; in the
second stage an Ordinary Least Squares (OLS) regression with selectivity correction is
used to examine the relationship between the outcome variables and a set of explanatory
variables conditional on the adoption decision. The two stages or regimes employed helps
to overcome the endogeneity and selection bias, using the ESRM framework. The two
outcome regression equations, conditional on adoption can be expressed as:
Regime 1 (a = Participants) : y1i = β1x1i + ε1i if S = 1
Regime 2 (b = Non participants) : y2i = β2x2i + ε2i if S = 0 …………….. (3.2)
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y1i, and y2i are smallholder farmers’ access to credit, output market, and income for
regimes (1) and (2) respectively, x1i and x2i are vectors of exogenous factors that are
thought to influence adoption in WRS; β1 and β2 are vectors of parameters to be
estimated; and u1i and u2i are random disturbance terms. These are assumed to have a
trivariate normal distribution, with mean vector zero and non-singular covariance matrix
shown below (Wooldridge, 2002).
12 . 1 Cov (ε1i, ε21, ui) = ( . 1 22 2 ) ………………………………… (3.3) 2where 12 and 22 are variances of the stochastic disturbance terms in the regimefunctions in equation (2). 2 is the variance of the stochastic disturbance term in the
selection equation shown as equation (1). 2 represents the covariance of the
stochastic disturbance terms in equation (2) while 1 is the covariance of ε1i and ui. .
2 is the covariance of ε2i and ui. The covariance between ε1i and ε21 is not defined because y1i and y2i from equation (2) are not determined simultaneously and it was assumed that 2 =1 because α is estimable only up to a scalar factor (Maddala, 1983).
A useful implication of the error structure is that the stochastic disturbance terms from
the regime equations shown in equation (2) are correlated with the stochastic disturbance
term in the selection equation. Therefore, expected values of the stochastic disturbance
terms from the regime functions in equation (2) conditioned on sample selection are not
equal to zero as shown below:
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Where Φ is the standard normal cumulative density function and φ is the standard normal
probability function. If the estimated 1 and 2 are statistically different from zero, the null hypothesis of absence of self-section is rejected. This means that the decision to participate in WRS and the outcome variables (access to credit, access to output market and crop income) are correlated (Maddala and Nelson, 1975).
Full Information Maximum Likelihood Estimation (FIMLE) is used to estimate the
endogenous switching regression model (Shiferaw et al. (2008). FIMLE estimates the
decision criterion and the regime regression equations at the same time. Given the
assumption with respect to the distribution of the stochastic disturbance terms, the
FIMLE of equations (3.1), 3.2 and (3.3) is given as:
( )( 1 )= ∑ { ( { ( ) +
1
}) + −1 1
1
( 2 )(1 − ) ( {1 − ( )} + (
2
} ………..…………………. (3.6)
2
2
Where = ( + / ) j = 1, 2. φ is the standard normal cumulative distribution√1− 2
function, f is the standard normal probability density distribution function, wi is an
optional weight for observation i, σ1 and σ2 are standard deviations of the error terms
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from the two regime equations. Again, ρ1 and ρ2 are correlation coefficients between ui
and respective stochastic disturbance terms from the two regime equations. After the
parameters are estimated, the study then estimates the access to credit, output market and
farm income of smallholder farmers that participated in WRS and those that did not
participate
Conditional Expectations, Treatment and Heterogeneity Effects
Endogenous switching regression model can be used to compare the following: The
expected access to credit, access to output market, and crop income of smallholder
farmers that participated (a) with respect to smallholder farmers that did not participate
(b). It is also, to investigate the expected access to credit, access to output market, and
crop income in the counterfactual hypothetical cases (c) that the participated smallholder
farmers did not participate, and the counterfactual hypothetical case (d) that the non-
participated smallholder farmers participated. The conditional expectations for the
outcome variables in the four cases are presented in table 3.1 and defined as follows:
The dependent variable, Access to credit, access to output market, and crop income, is an
indicator for whether smallholder farmers have access to credit, output market or
obtained higher crop income at the time of the survey.
The independent variable of interest, participation of WRS (Treatment), is a dummy
variable taking a value of 1 if farmer participates, and 0 otherwise.
The factors of access to credit, access to output market, and crop income that determine
participation of WRS are jointly estimated by the PSM model. However, the model
specification for ESRM on the three outcome variables are estimated separately from
selected explanatory variables.
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Table 3.2: Explanatory Variables of Participation of WRS and their Expected SignsExplanatory Variable Description Aprior Sign
Age Age of farmer measured in years +Farm Size Size of farm land in hectors +Education (Edu) Formal educational level attained by +
respondent, measured in yearsGender Farmer is assigned 1 if males and 0 +/-
otherwiseHousehold Size (HseSiz) Farmer’s household size measured in +/-
absolute figuresFarmer Based Organisation Farmer is assigned 1 if they are members +(FBO) of FBO and 0 otherwiseDistance to market Distance to market measured in km +Cost of Input Cost of input measured in cedis -Loan Access Farmer is assigned 1 if they have access to +Extension Services Farmer is assigned 1 if they have access to +
extension services and 0 otherwiseLabour Cost Cost of labour measured in man days -
(Cedis)Maize Output Quantity of maize harvested measured in +
kgStorage facility Farmer is assigned 1 if they have storage -
facility and 0 otherwiseSkill Training Farmer is assigned 1 if they have acquired +
additional skill training and 0 otherwiseMarket Information Farmer is assigned 1 if they have access to +
market information and 0 otherwiseExperience Farmer’s experience in farming, measured +
in yearsEstablished buyer Farmer is assigned 1 if they have +
established buying relationship withsomeone and 0 otherwise
Labour offer Farmer is assigned 1 if they offer their -labour to work at other farms and 0otherwise
Tax Amount of money paid as tax on maize -sold measured in cedis
Maize price Price in which a bag of maize is sold +measured in cedis
Statement of hypothesis:
Ho: Warehouse receipt system has no significant effect on farmers’ access to credit,
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output market or farm income.
H1: Warehouse receipt system has a significant effect on farmers’ access to credit,
output market or farm income.
3.5 Source of Data
Cross-sectional survey and ethnographic method of in-depth interviews are used to
generate quantitative and qualitative data. Structured questionnaires were administered to
smallholder individual maize farmers. Key informants (key stakeholders including
MOFA, Ministry of Trade and Industry, Financial institutions, Ghana Grains Council,
warehouse operators, heads of Farmer based organisations), and selected smallholder
farmers were interviewed. This study adopted the definition of Singh, (2002) which states
that “smallholder farmers are those marginal and sub-marginal farmers that cultivate less
than 2.0 hectares of land in a particular growing season”.
3.5.1 Study Area
Northern region was purposively selected for the study (Figure 3.2). This was because
there were five certified warehouses in Tamale with a total capacity of 21,500MT that
issued receipt. There were also nine community warehouses approved by the GGC that
operated in the Northern region. Six communities in three districts were selected based on
the presence of community warehouses approved by the GGC. The communities are
Diare, and Tamaligu in Savelugu District; Kpatinga, Kpugi, and Gaa in Gushegu District;
and Shelilanyili in Karaga district.
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Figure 3.2: Map of Ghana showing location of the study areaSource: Centre for Remote Sensing and Geographic Information Services, University of
Ghana
Northern region covers a total land area of 70,380 square kilometers, representing 29.5%
of the total land area of Ghana (MOFA, 2011). There are 318,119 households in the
region of which 240,238 are into agriculture. Two hundred and thirty thousand, four
hundred and fifty two (230,452) households are into crop farming (GSS, 2013).
3.5.2 Sampling Procedure
A sample size of 400 respondents were randomly selected from the six communities
mentioned above, using the Slovin’s formula as explained by Ellen (2012). The bases for
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the calculation of this sample size was informed by the population of maize farmers at
each community, obtained from the agricultural department of each district assembly.
Simple random sampling technique was used to select 135 individual farmers from
Kpatinga, Kpugi, and Gaa in Gushegu District; 170 individual farmers from Diare and
Tamaligu in Savelugu District; and 95 individual farmers from Shelilanyili in Karaga
district.
3.6 Scope and Limitations of the Study
The scope of the study is to assess the institutional arrangements of WRS in Ghana, to
identify the promotional activities and the extent of farmers’ awareness about WRS, to
evaluate the perception of farmers about the benefits and constraints of WRS, and to
determine the effect of WRS on access to credit, output market and farm income. The
study area is the Northern region of Ghana.
Most of the information gathered for this work pertains to Northern region. Although the
information collected from the GGC, financial institutions and other public organisations
applies to the entire WRS in Ghana, it may be deceitful to link the findings of this study
to the entire country. The study is therefore limited to and only gives an insight into the
prevailing situation in the Northern region. Nevertheless the results give a fair idea of the
situation of WRS in Ghana, since Northern region is the hub of warehouse receipt system
in the country where the office overseeing the WRS in the three Northern regions
(Northern region, Upper East and Upper West) is located.
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The study may also be limited by time and financial constraints. With time as a limiting
factor, it was difficult to stay on the field for long time to collect more data. This was
because more time was spent on a questionnaire as the farmers could not answer the
questions themselves, unless through the assistance of enumerators. It was also the wish
of the study to cover all the three Northern regions. This is because the Ghana Warehouse
Receipt Promotion (GWARP) project funded by AGRA occurred in these regions.
Expanding the research to Upper East and Upper West would have therefore given a
clearer picture of the contribution of WRS to smallholders’ access to credit, access to
output market, and income. Although this could not jeopardize the quality of the research,
the details and level of scientific study thereof are limited by time and financial
constraint.
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CHAPTER 4
RESULTS AND DISCUSSION
4.1 Introduction
This chapter presents and discusses results obtained from analysis of data collected from
respondents as pertaining to the objectives of the study and how they reflect what already
exists in literature. It includes the socio-economic background of respondents and,
summary of responses in frequency and percentages which are presented in tables and
charts. A discussion of the econometric results from endogenous switching regression
model and propensity score matching is also presented in this chapter.
4.2 Socio-economic Characteristics of Respondents
The majority of respondents are Muslims (99.5%) and mainly Dagombas (98.5%) (Table
4.1). The other ethnic groups are Mamprusi, Fulani, Frafra and Moshi, making up to
1.5% of the sample. The mean age of respondents is 39 years old with the majority aged
between 26 years and 50 years (82.2%). The majority are married (91.8%) and the mean
household size is 9 (Table 4.2). Only 29.8% had attained formal education, dominated by
junior high school (10.3%). This is followed by primary school (9.8%), and senior high
school (6.3%). Maize farming in the research area is a male dominated activity whilst
4.3 Analysis of Institutional Arrangement for Successful Operation of WRS.
Institutional arrangement is a vital tool for the development of every project (Kelly et al.
2014) of which WRS is no exception. This section discusses how the electronic and
community WRS are operated in Ghana; it assesses the adequacy of institutional
arrangement of WRS in Ghana, and provides a review of the functions of supporting
private and public organisations of WRS in Ghana.
4.3.1 The Operation of Electronic Warehouse Receipt System in Ghana
Before farmers take their maize to the warehouse, an entry form is picked at the gate or
security post. This form specifies the registration number of the car bringing the load,
quantity of maize on board, and name and contact of the depositor. The maize then goes
to the Sampler for moisture content test. The moisture level of maize accepted for
storage is 12 to 13%. The sampler then cleans the maize by removing all chaff and stones
with a machine. The cleaned maize is then weighed and re-bagged in 50kg bags. By
practice, the maize is weighed at 51kg in order to make up for weight loss during storage,
when the maize is fully dried. The sampler then takes a sample of the maize in the
presence of the depositor and a Collateral Manager.
The duty of a collateral manager is to monitor activities of warehouses. The manager
ensures that grain in the warehouse is of high quality. This boosts the confidence of
financial institutions in the system for loan considerations. After the samples are taken,
the sampler and the collateral manager take it to the Ghana Standards Authority (GSA)
for grading. A form is then generated at the GSA, stating the type of grade for the
sampler, collateral manager and the depositor to sign before the grain are stored in the
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warehouse. Details from the GSA report are also keyed into an electronic system of the
warehouse for the collateral manager to append his online signature before electronic
warehouse receipt is generated to the depositor. The warehouse receipt bears the name of
the depositor, location of the warehouse, number of bags and specific grade of maize
stored, and duration of storage.
4.3.2 How Electronic Warehouse Receipt (WR) is used to Access Loan in Ghana
When depositors want to take loan, they issue or pledge the warehouse receipt (WR) to a
stakeholder financial institution, as collateral against the commodity in stock. The
financial institution upon receipt of the WR, logs into the GGC’s system to declare that a
named depositor has approached them for loan. The collateral manager then gives his
approval before the financial institution issues a loan up to 60% of the value of maize in
stock. Once the commodity is collateralised, the collateral manager monitors the grain on
daily basis to make sure it is not sold without his consent.
When a depositor who has pledged his receipt for loan is ready to sell, the warehouse
operator and the collateral manager are informed. The collateral manager alerts the
financial institution and ensures that the buyer pays the money directly to the financial
institution, which then takes the loan amount with interest from the payment, and
transfers the storage charges to the warehouse operator. The balance is given to the
borrower. Another receipt normally referred to as a transferable WR is then generated at
the warehouse for the buyer. This receipt bears the name of the buyer, who may decide to
withdraw the maize or continue to store the produce in the warehouse. The warehouse
receipt can also be pledged for other credit such as farm inputs. The input dealer upon
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receiving a WR, issues inputs equivalent to 60% of the commodity stored. The buyer
pays the money to the input dealer when the maize is sold. Maize can be stored in
certified warehouses up to ten months duration. However, five months is recommended
in order to reduce storage cost and price falls, when other food stuffs such as tubers are
introduced into the market.
Unlike the community warehouses, all certified warehouses are insured against theft,
flood, fire and other risks. A minimum of 50 bags of maize (5 tonnes) is accepted for
storage. Nevertheless, ten bags (50kg) of maize are currently accepted by some
warehouses in the Northern region, since they are still at the promotional stage.
Smallholder farmers are however advised to combine their produce in order to make up
to the number that could enable them to participate in the system. Some of the
organisations that buy from the warehouses are Premium foods, World Food Programme,
and Agri-serve.
4.3.3 Operation of Community Warehouse Receipt System
The Ghana Grains Council (GGC) WRS was designed for smallholder farmers to
participate. However, farmers incurring transportation cost to send their produce to the
electronic warehouses in the urban or peri-urban areas, and waiting for some time to sell
against their family needs were some of the challenges faced. Smallholder farmers
therefore participate through the community WRS. In the community WRS, farmers
deposit their maize in a warehouse of about 80MT capacity, located in the same
community or a nearby community. The majority of farmers (about 80%) who participate
in the community WRS are members of farmer based organisations (FBO) (Appendix 1).
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In order for smallholder farmers to have a continuous access to credit and output market,
GGC has linked electronic warehouses to the community warehouses to mop-up their
produce. For instance, Diare community warehouse in Savelugu District, and Tamaligu
community warehouse in Karaga district were linked to Gundaa electronic warehouse in
Tamale. Kpatinga, Kpugi, and Gaa community warehouses in Gushegu district as well as
Shelilanyili community warehouse in Karaga district are linked to Savanna electronic
warehouse. Under this arrangement, the community WRS is operated in the form of
nucleus farmer and out grower scheme mechanism.
At the beginning of a farming season, the electronic warehouse operators (here as the
nucleus farmers) under whom specific community warehouses are registered borrow
money from the bank on behalf of the smallholder farmers. These credits are given to the
smallholder farmers in the form of farm inputs. The nucleus farmer ploughs the farm land
of the smallholder farmers (out growers) for a 110kg bag of maize for an acre of land
ploughed. In addition, the smallholder farmers are supplied with improved seeds,
fertilizers, insecticides and transportation of produce to the community warehouses.
Farmers are also offered advice on agronomic practices that would help them enhance
their productivity.
When smallholder farmers are ready to sell, the nucleus farmer buys the produce from the
warehouses at the prevailing market price. The cost of inputs supplied to the smallholder
farmers at the beginning of the farming season is taken from the total amount of produce
sold before the balance is given to the farmers. The nucleus farmers in turn service the
loan borrowed from the bank.
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The community WRS differs from ordinary nucleus farming system or contract farming
for the following reasons:
1. The farmers store their maize at a common warehouse. This makes it impossible
for the participating farmers to sell their produce secretly without the knowledge of the nucleus
farmer (the electronic warehouse operator). Thus, the community warehouse operator ensures
that all credit given to the smallholder farmers are duly paid.
2. Farmers obtain the exact market price for their produce. This is made possible
because the GGC gets the prevailing market price information from ESOKO and disseminate
them to the participating farmers as text messages on their mobile phones.
3. Participating farmers can wait and sell their produce later when the market price
appreciates, in order to increase their income.
4.3.4 Analysis of Adequacy of Institutional Support to WRS
Stakeholder influence matrix was used to assess whether the 25 institutional indicators
listed in section 3.4.1 operated in the WRS in Ghana or not (Table 4.2). An institution
was assigned 1 if it operated in Ghana and 0 otherwise.
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Table 4.2: Institutional Arrangement in the Warehouse Receipt System in GhanaInstitutional Indicator Performance
Legislation of WRS 0
Standardisation of maize 1
Grading of maize at electronic warehouses 1
Promotion of WRS to farmers and other stakeholders 1
Establishment of commodity exchange market 0
Licensing of electronic and community warehouses 1
Inspection of electronic and community warehouses 1
Provision of insurance at electronic warehouses 1
Building of market settlements and warehouses in district capitals 1
Linkages of financial institutions to the WRS 1
Willingness of financial institutions to lend against WR 1
Training of staffs of banks on lending procedures in WRS 0
Establishment of indemnity fund in WRS 0
Provision of market information to farmers in WRS 1
Networking of electronic warehouses 0
Provision of extension services to farmers in WRS 1
Building of warehouses to support the community WRS 0
Training of farmers on quality standards & maize treatment 1
Low interest rate policy on lending in the WRS 0
Upgrading of community WR with security features 1
Capacity building of warehouse operators on grading 1
Development of farmer based organisations 1
Enhancement of maize productivity by farmers in the WRS 1
Propagation of grain standards to stakeholders in the grain value 1
Development of policies in the agricultural sector 1
NB: 1 means that the functions are performed (Yes), whilst 0 means No, the functions are not performed (Gap).
These responses were analysed using chi-square goodness of fit test to check whether the
number of WRS institutions that are in existence and operated in Ghana are equal to the
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number of institutions that do not operate. The results show that the number of
institutions that operate (f = 18) are greater than the institutions that do not operate in
Ghana (f = 7) (Table 4.3).
Table 4.3: Frequencies: Expected and Observed Functions of WRSOperation of institution Observed N Expected N Residual
No 7 12.5 -5.5
Yes 18 12.5 5.5
Total 25
The test statistics show that the result is significant [X2 (1) = 4.8402, P ≤ 0.05]
The chi-square statistic (Table 4.4) is significant at 5 % and the null hypothesis is
therefore rejected in favour of the alternative. This indicates that the number of
institutions that operate in Ghana WRS are more than the institutions that are not in place
and operate in Ghana. This result is contrary to the result by KENFAP, (2011), which
found that the WRS in Africa lacks institutional support to ensure its successful
operation. The study however disclosed that the legislation of WRS and the commodity
exchange market that are not fully in place hinders the operation of WRS in Ghana.
Table 4.4: Test Statistics of Institutional Performance to WRSPerformance
Chi-Square 4.840
df 1
Asymp. Sig. 0.028
0 cells (0.0%) have expected frequencies less than 5. The minimum expected cell frequency is 12.5
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The details on the institutional arrangement on whether they completely exist, partially
exist, or absent, are fully discussed under the review of the functions of private and
public supporting organisations responsible for the drafting or enactment of those
institutions.
4.3.5 Review of the Activities of Supporting Organisations of WRS
Functions of certain organisations primarily affect the operations of WRS whilst others
are secondary. This section discusses public, private or voluntary organisations whose
functions or institutional support directly affects the operations of WRS in Ghana. The
public organisations discussed here are; Ministry of Food and Agriculture (MoFA),
Ministry of Trade and Industry (MoTI), Ministry of Local Government and Rural
Development (District Assembly), and Ghana Standards Authority (GSA). The private
organisations involved are; Ghana Grains Council (GGC) and Financial Institutions.
Other voluntary organisations that are mentioned as results of their contributions to WRS
are; Alliance for a Green Revolution in Africa (AGRA), Agri-business System
International (ASI), Ghana Agricultural Development and Value Chain Enhancement
(ADVANCE), USAID, and Farmer Based Organisations (FBOs).
4.3.5.1 Ghana Grains Council (GGC)
The Ghana Grains Council (GGC) was established in 2010 with initial funding from
USAID. Wienco was the first electronic warehouse that was registered under the system.
The council however started receipting in 2012.
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The community warehouses were taken over by the GGC from another project known as
Agri-business System International (ASI) that was funded by AGRA. ASI was basically
focused on post-harvest losses, which featured well in the basic concept of the GGC’s
warehouse receipt system. The ASI and the Ghana Agricultural Development and Value
Chain Enhancement (ADVANCE) project were able to put up sixteen community
warehouses with the capacity of 80MT each for the farmer aggregation unit. These
structures were being run by FBOs at the various communities. GGC inherited these
warehouses from ASI after their exit. The electronic WRS could not start at the
community level because it requires logistics such as computers, scanners, photocopiers,
weighing machines, internet connectivity and so forth, which were difficult for
smallholder farmers to afford. The electronic warehouse receipt system was therefore
concentrated in the urban and peri-urban centres.
In order to upgrade grain quality and improve grains standards, the GGC partnered Ghana
Standards Authority (GSA) to do grading. Community warehouses are exempted from
the strict grading system, and are allowed to use manual receipt system known as “Goods
Received Note (GRN)” instead of electronic warehouse receipts. This receipt however,
lacks security features that could enable farmers pledge it for loans from formal financial
institutions. Table 4.5 summarises the expected functions, observed functions and
deficiencies or gaps in the function of GGC towards WRS.
In order to improve access to credit by smallholder farmers, the GGC has replaced the
GRN with an improved security featured receipt, yet to be piloted. In this new receipt
system, a triplicate manual receipt is written when a farmer deposits his or her maize at a
community warehouse. These receipts come in three colours; white, pink, and green. The
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white original receipt is given to the depositor, the pink goes to the GGC’s office, and the
green receipt is kept at the community warehouse. Depositors can only retrieve their
grains from community warehouses upon reconciling all the three receipts. When the
GGC receives the pink receipt, they key all the information on it in a central depository.
When a smallholder farmer who has deposited maize at a community warehouse wants to
pledge the new receipt for a loan, the financial institution can easily log-in to the central
depository of the GGC in order to verify the authenticity of the receipt, and the quantities
of maize stored at a specific community warehouse. The farmer however has to inform
the GGC first on his or her intentions to take loan. The GGC then opens up the receipt for
financing from their data base. Thus, the GGC further acts as a collateral manager to
protect the interest of financial institutions. This arrangement also enables GGC to
connect buyers to community warehouses. This is because it gives the council upper hand
to know the quantities of maize stored at a particular community warehouse at a point in
time. In this case, when a buyer wants to buy collateralised maize, all payments must pass
through the financial institution in question.
According to Bryde (2008), warehouse receipts can continually be used to access credit
from financial institutions when the following fundamentals are in place: licensing,
inspection and insurance of warehouse, legal framework, and indemnity fund. The GGC
has licensed five electronic warehouses and nine community warehouses in the Northern
Region. All the electronic warehouses are insured against theft, fire, flood and other
catastrophes. The community warehouses are however, not insured. The warehouses are
occasionally inspected to make sure warehouse operators abide by regulations instituted
by the council.
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Table 4.5: Review of Performance of Functions by GGCExpected functions Observed functions
Electronic Communitywarehouse warehouse
Promotion of warehouse receipt system Licensing and inspection of warehouses Ensures that warehouses are insured -
Advocates for legislation in the WRS Ensure quality, productivity and profitability in the grain value chain
Dissemination of market price information to farmers Ensures access to formal market Linking financial institutions to the WRS Upgrade of community warehouse receipt Creation of Indemnity fund for depositors - -
Organisation of training and workshops for farmers and warehouse operators
Network of warehouses - -
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
The legislation of WRS specifies the rights and obligations of all stakeholders
participating in the system, and makes collateralised nature of the warehouse receipt
enforceable. The indemnity fund that is normally created by fees collected from
depositors and supported by public fund is also important to pay loans collected from
financial institutions during a potential loss by a particular warehouse. All these
arrangements boost the confidence of financial institutions to participate in the WRS.
Although the GGC has advocated for WRS legislation since its inception, it is still not in
place since the Commodity Exchange and Warehouse Receipt System Bill is still pending
in parliament. There is also no indemnity fund in place.
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4.3.5.2 Ministry of Trade and Industry (MoTI),
Table 4.6 indicates the expected and observed functions and, deficiencies of the Ministry
of Trade and Industry (MoTI) towards the operation of WRS. MoTI collaborated with the
GGC to promote grain standards with respect to quality, weight, and measures. The
Ministry therefore had several meetings, workshops and seminars with GGC, warehouse
operators, and leaders of FBOs on quality assurance and marketing. MoTI also
collaborates with MoFA to do market surveillance on prices of different commodities for
better economic planning. This helps the Ministry to set price mechanisms for the year.
MoTI however does not directly control market prices.
Table 4.6: Review of Performance of Functions by MoTIExpected Function of MoTI Observed Function
Electronic Communitywarehouse warehouse
Core MandatesFormulates policies that ensure successful trade relations of all sectors
Provides market information to stakeholders - -
To facilitate innovation and entrepreneurship Ensures legislations in the grain sector (WRS) - -
Ensures grain standards development Establishment of commodity exchange market - -
Support ServicesImproves the use of technology and access market -
Eases access to capital by the private sectors - -
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
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MoTI chaired the National Technical Committee (NTC) tasked to establish Ghana
Commodity Exchange market which will serve as the basis of developing “sight unseen”
trade in agricultural commodities. This market when established, would boost the
confidence of financial institutions in the WRS, and enhance market access and fair trade
for smallholder farmers. This is because it would serve as an avenue where foreclosed
maize is sold without physically transporting them to market. MoTI also played a major
role in the drafting of legislation for Commodity Exchange (CX) and Warehouse Receipt
Systems (WRS). The bill is pending in parliament yet to be passed into law. Meanwhile,
acceptances of warehouse receipts for financing by financial institutions strongly depend
on the legal framework and successful operation of the system (Chitra, 2014). It is
disclosed that the CX and WRS Bill will only be passed into law upon the passage of the
Securities Industry Amendment Bill. The new Amended Securities Industry Bill will give
the Securities and Exchange Commission the authority to regulate Commodities
Exchanges in Ghana. Until these legislations come into force, the access of smallholder
farmers to finance is tremendously affected as lending institutions are not encouraged to
participate in the WRS.
4.3.5.3 Ghana Standards Authority (GSA)
Table 4.7 shows the expected functions, observed functions, and functional gaps or
deficiencies of the Ghana Standards Authority (GSA). GSA directly operates under the
umbrella of MoTI, and it is mandated by law under the standards Act 1973 (NRCD 173)
to do grading of grains. They have therefore developed maize standards in Ghana. The
grading was initially categorised into three; grade one (the best grain), grade two and
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grade three. The grades were however extended to five in order to make it possible to
include smallholder farmers who may not have adequate logistics for thorough cleaning.
The GSA in collaboration with the GGC has organised several trainings and capacity
building for warehouse operators, samplers, and participating farmers on how to
determine moisture content, clean, treat, and store their maize. Maize stored in the GGC
certified electronic warehouses are sent to the GSA to be graded. Smallholder farmers
who store their maize at community warehouses are not compelled to grade their maize at
the moment. This is because they may not have the capacity to meet the cost of grading.
Table 4.7: Review of Performance of Functions by GSAExpected Function of GSA Observed Function
Electronic Community
Core Mandateswarehouse warehouse
Development of grain standards Propagation of grain standards to stakeholders and ensure high quality of grains produced
Approval of new weighing and measuring instruments -
Educating stakeholders on matters concerning standardisation and commodity grading
Testing for heavy metals and aflatoxin content in grains - -
Product certification scheme Calibration, verification and Inspection of Weights, -Measures and Measuring Instruments
Support Service
Provision of maize grading services for warehouses
Provision of training and capacity building for warehouse operators, weighers and samplers
-
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
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The current grading of maize is based on Ghana Standards Authority GSS 211: 2013:
Specification for Maize. Before maize is graded by GSA, a sample is taken randomly
from many bags brought by a depositor. These samples are mixed to obtain 1.0 kg for
laboratory analysis. About 200g or 500g of maize sample is taken, and are sorted out into
various blemishes such as diseased grains, discoloured grains, broken grains, stained
grains, germinated grains, shrivelled or immature grains, and insect damaged grains,
other grains, filth, organic and inorganic substances. Each blemish after sorting is
weighed and calculated as a %age of the total sample. The various percentages obtained
are combined and compared to standards as follow: if the blemishes are less than 11%,
the grains are labelled as grade 1, less than 17% is labelled grade 2, less than 24% is
recorded grade 3, less than 30% is grade 4, and less than 38% is assigned grade 5.
However, the specific %age limit for insect damaged and discoloured grains is 2.0. If this
limit is exceeded, the maize will never be classified as grade one even if it qualifies as
such. The inorganic and organic substances are excluded from the grading considerations.
The only limitation in the grading system is that, the office of the GSA in the Northern
region has no machines to test for aflatoxin and heavy metal content in the grains. Such
test has to be transported to the head office in Accra. The cost of grading also makes
storage charges expensive to depositors.
4.3.5.4 Ministry of Food and Agriculture (MOFA)
The Ministry of Food and Agriculture (MoFA) has a close collaboration with the GGC,
and this was testified by both the acting project coordinator of the GGC, who is a resident
at the Northern regional office, and the warehouse operator of Gundaa warehouse.
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According to the head of field operations at MoFA in the Northern regional head office,
the activities of GGC ensures high quality grains at the community warehouses as well as
ensuring good market prices for the produce. The farmers however were initially
reluctant to take their produce to the warehouses because of fear of reduction in quantity
after adequate cleaning and drying. MOFA therefore used their agricultural extension
agents to sensitise farmers by explaining to them the advantages of participating in the
system.
MoFA organised several trainings and workshops for smallholder farmers through their
FBOs to educate them on the activities of GGC and how it would benefit smallholder
farmers. MoFA also supplied training manuals and other logistics that were used for the
training. Farmers were also advised on how to enhance their agricultural activities.
Students were also selected from the University for Development Studies (UDS),
Nyankpala campus for trainer of trainees (TOT) programme. These students supported to
train farmers and sensitised them on how WRS operates. As depicted in table 4.8, MoFA
has done so much to help develop the WRS but there are deficiencies.
MoFA directly, does not develop FBOs. However, MoFA gives FBOs modalities and
targets to meet before they can be considered in any government interventions. Some of
these modalities are; opening of bank accounts by the group, regular organisation of
meetings, and the executive members of the FBOs attending all workshops and seminars
organised by MoFA. Some of the interventions provided by MoFA include linking input
dealers and buyers such as the World Food Programme, and school feeding programme
to the approved community warehouses.
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Table 4.8: Review of Performance of Functions by MoFAExpected Functions Observed Function
Electronic Communitywarehouse warehouse
Core MandatesCo-ordination of various development projectsin the agricultural sector:
Activities:- Promotion of warehouse receipt system (WRS)
- Provision of extension services to farmers
- Provision of training manuals for WRS
- Organisation of training for stakeholders in the WRS
Formulation and implementation of policies for the agricultural sector
Monitoring and evaluation of the projects and programmes instituted to assess their progress
Disseminate market price information to stakeholders
Support ServicesAdvocate for low interest rate policy on loans for farmers in WRS
-
- -
Advocate for involvement of lending institutions in - -WRS
Assisting farmer based organisations to function
efficiently
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
MoFA also collects weekly market price information on food stuffs and link them to
buyers and farmers, through their FBOs and radios. However, this market information
hardly got to farmers. Out of the 199 farmers who got access to market price information,
3.3% and 4.7% of farmers indicated FBOs and radios respectively, as their source of
market price information (figure 4.1)
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MoFA has not been able to also support the WRS in terms of getting more lending
institutions to participate in the system, especially at the community level. Interest
charged on loans by the few financial institutions is also high, and that deters farmers
from going to them for loans.
12.30%26.40%
Other farmers
FBOs
3.30%
T.V
Radio52.90%
Figure 4.1: Sources of Market Price Information to Smallholder Farmers
4.3.5.5 Financial Institutions
Smallholder farmers’ access to credit, especially loans from formal financial institutions
is the primary goal for establishing WRS (Mahanta, 2012). Although a number of
financial institutions, including insurance companies, are stakeholders in the system,
there are only four banks involved. These banks are the Agricultural Development Bank
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(adb), Stanbic Bank, CCH Finance Ltd., and Ecobank. In an interview with the banks in
Tamale (apart from CCH Finance Ltd.), it was disclosed that some of their staffs had less
knowledge about the activities of the WRS (Table 4.9), and were not sure whether they
had any collaboration with the GGC or not. They therefore had to call their head offices
to ascertain whether such partnership exists. Nonetheless, they all expressed readiness to
finance warehouse receipts (WR) that are brought to their branches. They were, however,
shocked that no farmer had ever approached their branches with WR for loans.
When the acting coordinator of the GGC in the Northern region was asked about the
reason why farmers do not go for loan with the WR, it was disclosed that farmers are
reluctant to go for loans because of high interest rates. Some of the stakeholder banks
acknowledged that the WRS would be a better option to give loans to farmers. They
explained that smallholder farmers who come for group loans have proven not credit
worthy. This has compelled them to move away to nucleus loan scheme where loans are
given to large scale farmers who in turn distribute them to individual smallholder farmers
in the form of farm inputs. The large scale farmers buy the produce from the individual
farmers after harvest and re-sell them to service the loan. The financial institutions
believe that financing a collateralised warehouse receipt system would be the best
alternative to give loans to smallholder farmers.
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Table 4.9: Review of Performance of Functions by the Financial InstitutionsExpected Functions of Financial Institutions Observed Functions
Electronic Communitywarehouse warehouse
Lending against commodities in stock in the WRS -
Provision of education on borrowing procedures -
Low interest rates policy for loans that are contracted - -with warehouse receipts
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
4.3.5.6 Ministry of Local Government and Rural Development (District Assemblies)
District Assemblies are fully aware of operations of the GGC’s warehouse receipt
system. The expected and observed functions and, functional gaps or deficiencies of
District Assemblies to the WRS are summarised in table 4.10. Through its department of
agriculture, the District Assemblies organised training for farmers, through the FBOs.
The assemblies ensure that all agricultural programmes and interventions from the
regional office are duly implemented at the research communities.
The assemblies have also constructed roads that link most food producing areas to the
communities. The majority of respondents (89%) testified that there are road networks
from their farms to the communities, although 63% said the roads are not in good shape.
Good market settlements that are equipped with warehouses are also built at the district
capitals. Farmers therefore have the opportunity to send their produce to main market
centres on market days that are organised every six days.
One core function of MoFA is to provide extension services to farmers. They are
supposed to visit farmers on the field but due to reduced number of staff, such
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interventions and educations are channeled through FBO meetings. When farmers were
asked whether they had ever been visited by extension agents, 37% of farmers responded
yes. The majority of farmers (63%) had never been visited by extension agents on the
field.
The district assemblies, through its agricultural departments, are supposed to build more
community warehouses as part of their social intervention programmes to help
smallholder farmers reduce post-harvest losses. However, there are inadequate
warehouses at the community level. All the research communities had only one
warehouse for the WRS programme with a capacity of 80MT. Therefore, only a fraction
of farmers are able to store their produce at the warehouse.
Table 4.10: Review of performance of functions by the District AssembliesExpected Functions of District Assemblies Observed Functions
Electronic Communitywarehouse warehouse
Construction and maintenance of rural road networks to link farming communities
Building of market settlements with warehouses at District capitals
Building of warehouses to reduce post-harvest losses - -
Provision of extension services to farmers -
Implementation of agricultural policies from regional department of agriculture
means that the functions are performed, whilst hyphen (-) means that the functions are not performed (Gap).
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4.4 Scope of Promotional Activities and the Extent of Farmers’ Awareness aboutWRS
This section discusses the communication channels and content of messages used to
promote the WRS to farmers. The extent of farmers’ knowledge about the functions of
GGC’s WRS is also assessed.
4.4.1 Scope of Promotional Activities by Ghana Grains Council
Since its inauguration in 2010, the Ghana Grains Council (GGC) has embarked on
intensive promotional activities to create awareness about the warehouse receipt system
(WRS). Some of the channels used for the promotion of WRS in the Northern region
include television (Savanna television), radio, newspaper publications, extension agents,
trainer of trainees approach (TOT), and traditional gong-gong beating system through the
traditional leaders at the various communities. Seminars and workshops were also
organised for leaders of the Farmer Based Organisations (FBOs), and a few selected
agricultural students of University for Development Studies (UDS) in the TOT
programme to help disseminate information to respective communities. GGC explained
to farmers about the benefits they stand to gain when they participate in the programme.
Some of these benefits as explained to the farmers include access to storage facility,
access to credit, access to market, and high price for their produce. The trainers however
targeted members of the FBOs.
The promotion of the WRS to smallholder farmers was intensified in the year 2013, when
the GGC had support from Alliance for a Green Revolution in Africa (AGRA) to embark
on a project known as the Ghana warehouse receipt promotion (GWARP). The project
was divided into three phases, and was operated in the three Northern regions in Ghana
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(Upper East, Upper West and Northern region). The first phase of the project was
specifically meant to register more smallholder farmers into the WRS. Training and
capacity development was therefore organised for smallholder farmers at the grass root.
Training of grain aggregators who may mop-up the produce of smallholder farmers into
the community warehouses was the second stage of the project, whereas the third face
focused attention to the renovation of community warehouses.
4.4.2 Extent of Farmers’ Awareness about WRS
All the 400 farmers interviewed were aware of the operation of warehouse receipt system
at their communities, though some did not have detailed information about the activities
of the system and benefits that come with it. Respondents shared their knowledge and
experience to confirm the extent of awareness.
4.4.2.1 Knowledge on Functions of WRS
Farmers’ knowledge about twelve elements of activities or benefits of WRS was
assessed. About 36% of the respondents knew that warehouse receipt system can enhance
access to credit from financial institutions, while 40% were aware of the possibility to
collateralise the commodity in stock using the warehouse receipt (Table 4.11). Nearly
40% of respondents were aware that participation in electronic WRS provides insurance
package for depositors; more than a third are aware that the system provides track record
on borrowers to financial institutions (35.5%). On the provision of access to formal
markets, 49% expressed knowledge about it whilst 63.5% indicated that they had no idea
that participation in electronic WRS involves quantity or quality limit.
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Table 4.11: Extent of Farmers’ Awareness about WRS: Distribution, Mean Score and Chi-square Analysis
Activities or Benefits of WRS Knowledge of Benefit of WRS
* Values in parentheses are in percentages. For Chi-square, 0 cells (0.0%) have expected frequencies less than 5. The minimum expected cell frequency is 200
Results of the chi-square analysis (based on goodness of fit test) shows that more than
half of the farmers significantly had knowledge about six functions (with respect to their
frequencies and p-values) (appendix 2 and Table 4.11). These are provision of storage
facility, reduction of post-harvest losses, helping farmers to obtain market information,
helping farmers to obtain higher prices for their produce, elimination of cheating during
sales, and reduction of transport cost to market.
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The results also show that more than half of the farmers significantly had no knowledge
about the following functions of WRS (appendix 2); provision of collateral for loan,
helping farmers to obtain loans, provision of track record of farmers to financial
institutions, provision of insurance for farmers, and imposition of quality and quantity
limit on farmers in the electronic WRS. The null hypothesis which stated that there is no
significant relationship between promotion and the extent of farmers’ awareness about
the functions of warehouse receipt system was therefore maintained since p-values of the
inferential statistics about those functions were all less than 0.05, indicating that the
extent of farmers’ awareness is low. This is consistent with the study by Chitra, (2014) on
factors influencing the use of warehouse receipt as a financial instrument in the Western
and Eastern regions of Kenya that shows that the majority of farmers in the study area
were not aware of the WRS. The two contrasting results on the extent of farmers’
awareness on different functions of WRS explain that some of the content of promotional
messages was understood by farmers better than others.
4.4.2.2 Knowledge on Benefits
The majority of respondents acknowledged awareness about the following activities of
WRS (Table 4.11): Provision of storage facility (99.7%), reduction of post-harvest losses
(97.3%), provision of market information (66.7%), enhancement of higher output price
(72%), elimination of cheating on farmers by buyers (60%), and sales of maize at
warehouse by participants without incurring extra cost to transport them to market (70%).
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4.4.2.3 Source of Information on WRS
When farmers were asked how they heard about the programme for the first time, 44%
and 28% got it through FBOs meetings and interactions with other farmers respectively
(Figure 4.3). Others heard it from the warehouse operators (19%) and extension agents
(3%). Radio (1%) and television (1%) were less important sources of information. This
result is consistent with the study of Simon et al. (2013) which concluded that social
media gives scanty information about promotion of a new project and that, interaction by
farmers in their social system is most important.
0.75%
3.75% 1% 1%
27.75%Television
Radio43.75%
FBO
WH Operator
Extension agent
19%
Co-farmers
Sign post3%
Gong-gong
Figure 4.3: Source of Farmers’ Information on WRS
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4.4.2.4 Participants’ Experience with WRS
Out of the 400 respondents who were aware of the WRS, 142 (35.5%) participated in the
community warehouse receipt system (figure 4.4). About 27% of the respondents said
they participated with the hope of obtaining all the benefits listed by the GGC when they
interacted with them – storage, market, credit, and high price (figure 4.5). This finding is
consistent with the result of Towo and Kimaro (2014) which finds that participation in
WRS by farmers is influenced by access to credit, access to commodity market, access to
good storage facility, and high price for produce. The majority expected to attain a
minimum of two of the benefits. A few people expected to attain only one of the benefits.
35.50%
64.50%Participants
Non-participants
Figure 4.4: Participation in Warehouse Receipt System
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The respondents affirmed that the gains acquired through participation in the community
WRS were related to credit, storage space and discount on storage price, market,
technical and managerial education. On credit, one respondent expressed the following:
“USAID helped me to acquire a tractor due to my participation in the WRS. I was
offered the opportunity to pay just 30% of the total cost of the tractor, while USAID paid
the remaining 70%. Meanwhile, I did not have immediate cash of that 30% value of the
tractor. So I told the USAID officers that I could pay later when my maize at the
warehouse is sold. The officers therefore inspected the maize at the warehouse and gave
the tractor to me” (Alhassan Seidu, Kpatinga community).
Storage, finance & High price
Storage, Market & Finance
Market access
Market & High price
Market, Finance & High price
Market & Financial Services
Storage & Financial Services
Reduction of post-harvest losses
Storage, Market & High price
Storage access
Storage & Market
Storage & High price
Storage, market, Finance & High price
0.70%
0.70%
0.70%
1.41%
1.41%
2.82%
3.52%
8.45%
9.15%
11.27%
16.20%
16.90%
26.76%
0 0.05 0.1 0.15 0.2 0.25 0.3Percentages
Figure 4.5: Reasons for Farmers’ Participation in Warehouse Receipt System
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Farmers who participated in the community warehouse receipt system stored a mean
quantity of 17 bags of maize (110kg per bag) for an average duration of five months.
Farmers are however allowed to withdraw part or all their produce from the warehouse
anytime they have shortage of food or money at home. An amount of GH¢ 1.0 is paid for
each bag of maize stored at the community warehouse by members of the FBOs, whiles
non-members paid GH¢ 2.0 each. The GH¢ 1.0 difference paid by non FBO members is
meant to complement the dues paid by members of the FBOs for maintenance of the
community warehouses. Participants obtained a mean price of GH¢ 140.0 from later sales
of their produce. Maize stored at the community warehouses is not graded and insured.
About 2% of the participants experienced post-harvest losses.
On technical and managerial education, respondents testified that workshops were
organised for the participants to train them on how the WRS operates, how to treat their
maize for storage, and good storage practices. One of the respondents expressed the
following:
“if your maize is stored at the warehouse, not even a single grain will drop from the bag.
The maize is also free from insect attack and mould” (Ibrahim Fuseini, Diare
community).
Farmers also testified that they were educated on good agronomic practices such as the
use of improved varieties of seeds for planting, planting in rows, fertilizer application
among others.
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4.4.2.5 Respondents’ Reasons for Non-Participation in WRS
A total of 258 respondents who were aware of the WRS did not participate in the project.
The major reason was related to the small volume of produce handled (about 61%). Small
quantities are stored at home for consumption. One respondent expressed the following:
“I was extremely happy when the importance of participating in the WRS was explained
to me by the warehouse operator. However, I have not been able to participate due to low
produce. I am afraid people will laugh at me when I send small quantities of maize to the
warehouse and go back for it few days later for household consumption” (Inusah
Mohammed, Tamaligu community).
Others gave reasons such as lack of adequate understanding about the benefits; long
distance to the community warehouse from their homes; fear that storage charges will be
exorbitant; and less space at the warehouse. One respondent expressed the following:
“I wish to participate in the WRS but the warehouse is too small. It is always full by the
time I harvest my maize” (Amidu Ibrahim, Shellilanyili Community).
Some of the farmers also claimed they had their own storage facilities. Others also
indicated that they thought the warehouse was meant for only members of the FBOs.
A few (1%) farmers in one community (Kpatinga), who were participants of the WRS
have decided never to participate again due to personal problems they had with some
leaders at the community warehouse. These farmers claimed that the warehouse operator
has compromised his position with partisan politics. Therefore, he only gives essential
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information to participants who are his party affiliates. One respondent expressed the
following:
“I was a member of the community WRS but I have stopped. This is because the leaders
are playing partisan politics with the project. If you are not affiliated to their political
party, they fail to give you information about buyers who would like to buy maize from
the warehouse, as well as other essential information” (Mohammed Abdul Karim,
Kpatinga).
Upon hearing the details and benefits of participating in the WRS, 232 non-participants
(89.92%) were willing to participate. This suggests that information on the WRS will
yield good response from the target group if well packaged.
4.5 Perceptions of Farmers about the Benefits and Constraints of WRS
Farmers’ perceptions about the benefits and constraints of WRS to their farming activities
could tremendously affect their participation in the project. Farmers gladly join WRS
when they find it relevant to their farming operations, especially as testified by others.
4.5.1 Farmers’ Perceptions about Benefits of WRS
The benefits of WRS as perceived by respondents are listed in Table 4.12. Enhancement
of access to output market was measured by three indicators; ability of farmers to sell
high proportion of produce, ability to sell to organisations, and ability to obtain high price
for the produce sold. The majority of farmers (85.3% and 84.5%) respectively perceived
that WRS enhances sale of high proportion of produce, and high price for produce sold,
while 52.3% believed WRS has the potential of enabling farmers sell to public and
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private organisations. The overall mean score of 2.11 indicates that farmers generally
agree that WRS enhances output market access.
With respect to facilitation of trade, 76.8% of farmers perceived that WRS enables
participants have access to ready market for their produce, 85.3% believed maize is sold
at the warehouse instead of incurring extra cost to transport them to market, 77%
perceived that WRS enables farmers have access to market information on prevailing
maize prices, whilst 69.8% perceived that WRS guarantees delivery of produce to buyers
on contracts basis. The general mean score of 1.97 signifies that farmers agree to the
facilitation of trade as enhanced by WRS. A few farmers agree that WRS enhances
access to credit, measured by four indicators; ability to obtain loans from financial
institutions (36%), ability to obtain large amount of loans (20.3%), moderate interest paid
on loans (13.3%), and provision of insurance against potential loss (3.3%). The general
mean score of 3.38 shows that farmers moderately agree that WRS enhances access to
credit.
Improvement of farm income is the motive of every farmer. It was generally agreed by
respondents with a mean score of 1.69 that the participation of WRS enables farmers
increase their income tremendously. With respect to indicators used to measure
improvement of income, the majority of farmers acknowledged that WRS reduces
transport cost to market (81.8%), curtails cheating on weight and quality (64.8%),
provides storage facility to participants (99.5%), and reduces post-harvest losses (95%).
However, respondents moderately agree that WRS mitigates price risk with a mean score
of 2.76, measured by reduction of seasonal price variability (31.8%), increases market
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power of farmers (62%), Links farmers to extension services (68.3%), and links farmers
to farm input dealers (45%).
Table 4.12: Perceptions of Farmers about the Benefits of WRSBenefits of warehouse receipt system Agree Not Sure Disagree Mean
Enhancement of access to output marketAbility to sell high proportion of produce 341 (85.3) 45 (11.3) 14 (3.5) 1.873Ability to sell to organisations 209 (52.3) 130 (32.5) 61 (15.3) 2.533Ability to obtain high price for produce 338 (84.5) 40 (10.0) 22 (5.5) 1.925
2.110Facilitation of tradeGuarantees ready market for produce 307 (76.8) 52 (13.0) 41 (10.3) 2.163Maize is sold at the warehouse 341 (85.3) 41 (10.3) 18 (4.5) 1.705Enable farmers obtain market information 308 (77.0) 81 (20.3) 11 (2.75) 1.870Guarantees delivery of produce to buyers 279 (69.8) 94 (23.5) 27 (6.8) 2.120
1.965Enhancement of access to creditAbility to obtain loans from financial 174 (36.0) 150 (73.5) 106 (26.5) 2.950InstitutionsAbility to obtain large amount of loan 81 (20.3) 190 (47.5) 129 (32.3) 3.240Interest paid on loans are moderate 54 (13.5) 156 (39.0) 190 (47.5) 3.863
3.380Improvement of farm incomeReduces transport cost to market 327 (81.8) 39 (9.8) 34 (8.5) 1.853Curtails cheating on weight and quality 259 (64.8) 117 (29.3) 24 (6.0) 2.168Reduces post-harvest losses 380 (95.0) 20 (5) 0 (0) 1.510Provides storage facility 398 (99.5) 2 (0.5) 0 (0) 1.230
1.690Mitigation of price riskReduces seasonal price variability 127 (31.8) 203 (82.5) 70 (17.5) 2.850Increases market power of farmers 248 (62) 100 (25.0) 52 (13.0) 2.415Links farmers to extension services 273 (68.3) 93 (23.3) 34 (8.5) 2.270Links farmers to farm input dealers 180 (45.0) 136 (34.0) 84 (21.0) 2.785
2.580** Values in parentheses are in percentages
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4.5.2 Farmers’ Perceptions and Ranking of Constraints of WRS
Results of farmers’ perception about challenges or constraints of WRS as listed to them
are presented in Table 4.13. Farmers’ perception that the participation in WRS at the
community level involves high storage cost was measured by two indicators; cost of
transport to warehouse, and payment for storage. The majority disagree that payment for
storage is high (59.8%), or there is high cost of transporting produce to the warehouse
(57%). The mean score of 3.45 nonetheless signifies that farmers moderately agree that
there is high storage cost at the community WRS. Again, there is quantity and quality
limit imposed on farmers to participate in the electronic WRS. It was therefore assessed
whether this limitation is applicable to the community WRS. However, the mean score of
3.54 indicates that farmers disagree there is a limit imposed on them in the community
WRS.
Farmers were also asked to indicate their perception about the effectiveness of regulatory
oversight by the GGC at the community level. This was measured by four indicators; no
insurance package, inadequate training on how stored maize is treated, non-transferable
warehouse receipt, and few financial institutions to borrow from. The overall mean score
of 2.57 indicates that farmers moderately agree that there is low regulatory oversight by
the GGC. Finally, farmers’ perception about lack of suitable storage infrastructure at the
community level was assessed. The majority disagree that there is long distance to
warehouse (64.5%); warehouses are not in good condition (71.8%); and WRS is used by
only rich farmers (50%). This is contrary to the assertion by Kumah et al. (2012) that
farmers were reluctant to participate in WRS because they perceived the system to be
used by only rich farmers. However, 90.5% of respondents acknowledged the fact that
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there are few warehouses to choose from. Every research community had only one
warehouse with a total capacity of 80 metric tonnes. In all, the overall mean score of 3.06
indicates that farmers moderately agree that there is the lack of suitable storage
infrastructure supporting the community warehouse receipt system.
Table 4.13: Farmers’ Perception of Constraints of WRSConstraints of warehouse receipt system Agree Not Sure Disagree Mean
High storage cost
High cost of transporting produce to 136 (26.8) 35 (8.8) 229 (57) 3.373WarehousePayment for storage is high 113 (28.3) 48 (12.0) 239 (59.8) 3.528
3.451
Limits imposed by warehouse operators
Quality limit is too high to meet 50 (12.5) 154 (38.5) 196 (49.0) 3.470
Quantity limit is too high to meet 47 (11.8) 132 (33.0) 221 (55.3) 3.605
3.538
Non effective regulatory oversight
No insurance package for stored maize 156 (39.0) 162 (40.5) 82 (20.5) 2.683
Inadequate training on how to treat maize 113 (28.3) 115 (28.8) 172 (43.0) 3.180Stored
Appendix 10: Logit Estimates from Propensity Score Matching ExplainingParticipation
Variable Coefficient S.E Z p-value Marginal effects (dy/dx)
Gender 0.500 0.808 0.62 0.536 0.034
Age 0.022 0.305 0.73 0.465 0.002
Education 0.095* 0.050 1.91 0.056 0.007
Household Size 0.031 0.047 0.66 0.510 0.002
Distance to market 0.131** 0.058 2.27 0.023 0.009
Cost of Labour -0.001** 0.001 -2.05 0.040 -0.001
Maize Output 0.180*** 0.029 6.19 0.000 0.012
Storage facility -0.806 0.620 -1.30 0.195 -0.055
Skill Training 9.460*** 2.142 4.42 0.000 0.649
Market Information 5.632*** 2.007 2.81 0.005 0.387
Extension Services 0.352 0.420 -0.84 0.403 -0.024
F.B.O Membership 1.137*** 0.433 2.63 0.009 0.078
Access to Loan 1.207** 0.542 2.23 0.026 0.083
Farm Size 0.089 0.100 0.76 0.448 0.005
Cost of Input -0.001** 0.001 -2.18 0.030 -0.001
Constant -19.470 3.965 -4.91 0.000
Dependent variable = Participation (Dummy = 1 if a participant); Number of observation= 400; Pseudo R2 = 0.6652; Log Likelihood = -87.1145; LR Chi2 (16) = 346.16; Prob > Chi2 = 0.0000; S.E = Standard Error (0.05); ME = Marginal Effects
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Appendix 11: Research Questionnaire
Target group: Maize farmers in the Northern region of Ghana
Questionnaire No…………………
My Name is Nana Kofi Safo, a Ph.D Agricultural Administration Student at the
University of Ghana. I am conducting a research on the “impact of warehouse receipt
system (WRS) on access to markets and income of smallholder maize farmers in the
Northern region of Ghana”.
Warehouse receipt system (WRS) is a system where farmers, exporters, or traders put
their grains in a registered warehouse to obtain an electronic receipt. However,
smallholder farmers normally have to combine their produce, through a community
warehouse system, in order to meet the quantity required to obtain the receipt from
electronic WRS. The objective of the research is to determine the extent to which Ghana
Grains Council’s (GGC) WRS has influenced smallholder farmers’ income and their
access to financial services and output market. The adequacy of institutional support to
the system will also be assessed in order have a successful programme that benefits
farmers.
Please, I need your support with respect to accurate information on your farming
activities as well as your participation or non-participation in the warehouse receipt
system (WRS). Findings of the study will be used for academic purpose only. Any
information given will therefore be treated confidential. Please indicate your response by
filling – in the space provided or ticking the appropriate box provided against the
answers. Please indicate your consent by giving details of your name and contact. Thank
you.
Name of respondent ………………………….………………………… Contact………………………….….Name of Enumerator……………………………………………………………………………………………Date of interview………………………………………… Start time………………………………………….
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Name of District …………………………………… Name of Community…………..……………………...
Section A: General Demographic Characteristics
1. Please provide information on your demographic characteristics in the table below
Gender of Age of Marital Highest Religion Household Ethnic
Respondent Respondent Status Educational Size group of
Level respondent
attained
1. Male [ ] 1 [21 - 25] 1.Single [ ] Before WRS 1. Muslim Before
WRS
2. Female [ 2 [26 - 30] 2.Married [ 2 Christian
] ]
3 [31 - 35] 3 Traditional
4 [36 - 40] After WRS 4 Other.. After
WRS
5 [41 - 45] 5. None
6 [46 - 50]
7 [51 - 55]
8 [56 - 60]
9 [Above 60]
Section B: Farmers’ Awareness of Warehouse Receipt System (WRS)
For each of the following activities or functions of WRS, specify your correct status of
knowledge, and experience, using the codes listed beneath the table.
Activities / Function of WRS Knowledge Experience
2. Provides receipts which can be used as collateral againstcommodity in stock
3. Enable farmers to obtain loans from financial institutions
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4. Enhances track records of farmers for loan consideration by banks5. Provides insurance to mitigate future catastrophes of commodities in stock6. Provides storage facility to farmers
7. Reduces post-harvest losses
8. Enable farmers obtain market information on quality and prices
9. Introduces farmers to formal markets, or institutional buyers
10. Enable farmers obtain higher prices from later sales
11. Eliminates cheating of farmers on quality, weight and measures
12. Maize are bought at warehouse without transporting them to market13. There is quantity and quality limits to participate in electronic WRS
14.
15.KNOWLEDGE EXPERIENCE
1. Very well 1. Never2. Fairly well 2. Once3. No 3. Twice
4. Several
16. If you are aware of the WRS, through what means did you hear about it for the first time?1. On Television[ ]
2.On Radio [ ]3.Newspaper [ ]
4. Through F.B.O[ ]5. Warehouse operators [ ]6. Through extension agent [ ]7. Other ………………………………………….
17. Do you participate in WRS? 1. Yes [ ] 0. No [ ] (If no, skip to 27)If yes, please provide the information on the table below:
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Number of Name of Location of Distance to Means of transport toyears of warehouse you the warehouse warehouse warehouseparticipation operate (km)
1. Own Transport [ ]2 F.B.O. []3. Hired []Other…
18. Main reason(s) for participating in the WRS: ( I. access to storage facility; II. access to markeIII. access to finance; IV. High price from later sale
1. I only [ ] 2. II only [ ] 3. III only [ ] 4. IV only [ ] 5. I and II6. I and III [ ] 7. I and IV [ ] 8. II and III [ ] 9. II and IV [ ] 10. III and
11. I, II, III [ ] 12. I, II, IV [ ] 13. I, III, IV [ ] 14. II, III, IV [ ] 15. ALL [16. Other reason (please specify) ……………………………….…………………..19. Please provide the following information with respect to storage of last season’s produce in the W
Quantities of How long did you Cost of storage Price gainedProportion of maize Cost of transmaize stored store the maize from storage lost from pest to warehouse
20. Was the maize graded before storage? Yes [ ] No [ ]21. If yes, what was the grade of your maize? ………………………………………………
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22. Did you experience post-harvest losses at the warehouse last season? Yes [ ] No [ ]
23. If yes, who paid for the losses?
1. Warehouse operator[ ]2. Insurance company[ ]
3. Myself [ ]
4. Other ………………………………….
24. Did you withdraw some of your maize from the warehouse for household consumption last
season? Yes [ ] No [ ]
25. If yes, what was the reason? 1. Shortage of food [ ]2. Shortage of money [ ]3. It was not bought[ ]
4. Other ………………………………………………
26. Have you ever attended any workshop on WRS after you decided to participate? Yes [No [ ]
If yes,Date of workshop Purpose of Organisers of last Number of times Was the worksho
workshop workshop of participating useful to you?attended
If you do not participate in WRS:
27. What is your reason(s) for not participating?
……………………………………………….……..
28.Are you willing to participate now? Yes [ ] No [] (If no, skip to
11)
29.If yes, what is the main reason(s) why you want to participate? ( I. access tostorage facility;
II. access to market; III. access to finance;High price from later sales )
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1. I only [ ] 2. II only [ ] 3. III only [ ] 4. IV only [
] 5. I and II [ ]
6. I and III [ ] 7. I and IV [ ] 8. II and III [ ] 9. II and IV [
] 10. III and IV [ ]
11. I, II, III [ ] 12. I, II, IV [ ] 13. I, III, IV [ ] 14. II, III, IV [ ]
15. ALL [ ]
16. Other reason (please specify) ……………………………….…………………..
Section C: Perception of Farmers about Benefits and Constraints of WRS
30. What is your perception about the following benefits of the WRS to you? ( Please tick one per row)
Benefits Strongly Agree Not Disagree Strongly
Agree Sure Disagree
Enhancing Market Access:
- Ability to sell high proportionof produce
- Ability to sell to orgainsations
- Ability to obtain high price foryour produce
Facilitate Trade:
- Maize is bought anytime youare ready to sell
- Maize is bought at thewarehouse withouttransporting is to the market
- Enables buyers and sellers gainaccess to market information
- Guarantees delivery ofcommodities to buyers
Enhancing Access to Finance
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- Ability to obtain loan from financial institutions- Ability to obtain large amount of loan- Interest paid on loan is moderate
Improves farm income
- Reduces transport cost to market
- Curtailing cheating on weight and quality
- Reduction of post – harvest losses
Provision of Storage Facility
Mitigating Price Risk
- Makes farmers aware of the prevailing market price in which they are to sell their produce.
Provision of insurance againstpotential lossReduces seasonal price variability
Increases market power of farmers
Links farmers to extension
services
Links farmers to input dealers
31. What is your perception about the following constraints of the WRS to you? ( Tick one per row)
and rank the problems from 1 to 12 according to which one is highest to you (1 is highest & 12 lowest)
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Constraints Strongly Agree Not Disagree StronglyAgree Sure Disagree
High storage cost:
- High cost of transporting produce to warehouse
- Payment for storage is high
Limits imposed by warehouse operators
- Quality limit too high to meet
- Quantity limit too high to meet
Non effective regulatory oversight
- No insurance package for your stored maize
- Lack of training on how to treat your maize
- Non transferable warehouse receipt
Lack of suitable storage infrastructure
- Long distance to warehouse
- Warehouses are not in good condition
- Few warehouses to choose from
- Few financial institutions to borrow from
- WRS is used by rich farmers and traders
Section D: Effect of WRS on Market Access of Smallholder farmers
Information on production
32. Number of years of farming in general
………...……………………………..….…
33. Number of years in maize farming only
……………………………………………
34. What is the distance to market
………………………………………………………
35. Farming History
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Activity Before WRS After WRS
(Last season)
36. Month of harvesting maize
37. Did you have any maize to sell last
season?
38. If no, what is the reason? 1. Did not farm [ 1. Did not farm [] ]2. Obtained small 2. Obtained small
produce [ ] produce [ ]3. Other… 3. Other…
39. Where do you sell your maize 1. Warehouse [ 1. Warehouse [] ]2. Farm gate [ 2. Farm gate [] ]3. Local market [ 3. Local market [] ]4. Other… 4. Other…
40. Have you ever sold to institutional 1. Yes [ ] 1. Yes [ ]buyers such as WFP, Schools, Prisons 2. No [ ] 2. No [ ]or Hospitals? (If no, skip to 43)
1. Instant payment 1. Instant payment41. If yes, did you get instant payment or on [ ] [ ]
credit 2. On credit [ 2. On credit [] ]
42. If on credit, how long does it take to be… …
paid?1. Poor quality [ 1. Poor quality [
43. If no, what is the reason? ] ]2. Low quantity [ 2. Low quantity [] ]3. Transport cost 3. Transport cost[ ] [ ]4. No information 4. No information[ ] [ ]5. Other… 5. Other…1. Yes [ ] 1. Yes [ ]
44. Did you sell all the quantities you2. No [ ] 2. No [ ]
wished to sell last season?
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Activity Before WRS After WRS
(Last season)
45. If no, what was the reason? 1. Low price 1. Low price2. Poor demand 2. Poor demand3. Poor quality of 3. Poor quality of
maize maize4. Speculation of 4. Speculation of
future high price future high price5. Other … 5. Other …
46. Indicate the monthly period in which your ... …
maize was sold 1. For high price [ 1. For high price [
47. Why did you sell around that time?] ]
2. Needed money 2. Needed money [[ ] ]3. No buyers 3. No buyers[ ] ]4. No storage 4. No storage spacespace [ ] [ ]5. Other… 5. Other…
48. What month was the highest general priceof maize
49. Indicate the price of 50kg bag of maize atthe highest price
50. Type of human labour used on your farm 1. Family [ ] 1. Family [ ]2. Hired [ ] 2. Hired [ ]3. Both [ ] 3. Both [ ]
51. Please provide detail information about the labour used during last seasonFarm Activities Family Labour Hired Labour
Number Number Number of Number Wage / If given asof persons of days persons of days day (GH¢) contract, indicate
the amount paidM F M F
Bush Clearing
Tillage
Seeding
Fertilizer application
Agro-chemical
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application
Weeding
Harvesting
Threshing
Drying
Bagging
Please respond to the following questions by writing 1 if yes, and 0 if noActivity Before WRS After WRS
(Last season)52. Did you offer your labour(s) to work on other … …
farms last season? 1. No much 1. No much work53. If yes, what was the reason? work on my farm [
on my farm [ 2. We needed2. We needed money [ ]
money [ ] 3. Other…3. Other…
54. Did you have optimal harvest last season? … …55. IF no, what was the cause? 1. No rain [ ] 1. No rain [ ]
2. Soil not fertile 2. Soil not fertile[ ] [ ]3. Low yielding 3. Low yielding
seed [ ] seed [ ]4. Too much 4. Too muchsun[ ] sun[ ]5. Other… 5. Other…
56. Do you use irrigation facility on your farm? (If … …no, skip to 58) … …
57. If yes, what was the cost of irrigation for theentire season?
58. Did you experience maize price variability last … …season (If no, skip to 61 1. Price 1. Price
59. If yes, what was the situation of the variability persistently persistentlythroughout the season after harvest? increased [ ] increased [ ]
2. Price fell at 2. Price fell atsome points [ ] some points [ ]
60. If price fell at some points in the season, whatwas the cause? 1.Maize import [ 1.Maize import [
] ]2.Release from 2.Release fromother other warehouse[warehouse[ ] ]3. Other… 3. Other…
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61. Do you have mobile phone through which youcan be contacted?
62. Do you have already established buyers for your … …produce? 1. Private 1. Private
63. If yes, what category of established buyers do organization[ ] organization[ ]you have? 2. Public 2. Public
70. Do you get market information on quality or … …price changes?(If no, skip to 73) 1. Other farmers 1. Other farmers
71. If yes, how do you get the information? [ ] [ ]2. F.B.O. [ ] 2. F.B.O. [ ]3. Television [ ] 3. Television [ ]4. Radio [ ] 4. Radio [ ]5.Newspapers [ 5. Newspapers[
72. When was the last time such information was ] ]obtained 6. Other…… 6. Other……
73. Do you have road network from farm to market … …
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or home?(If no, skip to 77) … …
74. If yes, is the road in good shape?75. Do you have access to transport services from … …
farm to market or home? … …76. If yes, indicate cost of transporting maize from
farm to market or home
Activity Before WRS After WRS(Last season)
77. Have you ever been visited by extension … …officer(If no, skip to 84) … …
78. If yes, how many times in a year? … …79. Indicate the last time such visit was 1. Storage of produce[ ] 1. Storage of produce[ ]
obtained? 2. Credit access [ ] 2. Credit access [ ]80. What do they discuss with you at the 3. Market access [ ] 3. Market access [ ]
88. What is your perception about the 3. Beneficial [ ] 3. Beneficial [ ]association? 4. Non beneficial [ ] 4. Non beneficial [ ]
5. Other… 5. Other…
l. Dues is too costly [ ] l. Dues is too costly [ ]2. Strict membership 2. Strict membership
Conditions [ ] Conditions [ ]89. If no, what is the reason? 3. Non Beneficial [ ] 3. Beneficial [ ]
4. Other……….. 4. Other……….
Section E: Access to Financial Services
Please respond to the following questions by writing 1 if yes, and 0 if noActivity Before WRS After WRS
(Last season)90. Are you aware of any financial institution that
lends to farmers?91. Do you have account with any financial institution? … …
(If no, go to 96) 1. Formal Bank[ ] 1. Formal Bank [ ]92. If yes, what type of financial institution do you 2. Credit unio [ ] 2. Credit union[ ]
have the account? 3. Rural Bank [ ] 3. Rural Bank [ ]4. Microfinance[ ] 4. Microfinance[ ]
… …93. Are you able to save money with that financial … …
institution? … …94. Do you have a branch of that institution at your
community?95. What is the distance (km) from your home to that
institution?96. Do you have any asset that can be used as … …
collateral for loan? … …97. If yes, what type of asset do you have?98. Have you ever requested for loan from any … …
financial institution?(If no, skip to 110) … …
99. If yes, indicate the amount of loan applied for 1. Formal Bank [ ] 1. Formal Bank [ ](GH¢) 2. Credit union [ ] 2. Credit union [
100. From what type of financial institution? 3. Rural Bank [ ] 3. Rural Bank [4. Microfinance [ ] 4. Microfinance [… …
101. Were you successful in obtaining the loan? (If … …no, skip to 111) … …
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102. If yes, what was the amount received (GH¢)? … …103. How many times have you received such loan? 1. Guarantee [ ] 1. Guarantee104. When was the last time such loan was received? 2. Other … 2. WR / GRN105. What collateral or its substitute did you use to 3. Other …
acquire the loan?1. Farm inputs [ ] 1. Farm inputs2. Consumption [ ] 2. Consumption [3. School fees [ ] 3. School fees
106. What did you use the loan for? 4. Other … 4. Other …… …… …
107. Were you satisfied with the services of the … …financial institution?
108. Indicate the number of months used to repay theloan
109. Indicate in %age per annum, the interest paid onthe loan
110. If you have not requested for loan before, what is your reason?1. I do not need it[ ]2. High interest rate [ ]3. Cultural reason [ ]4. Religious reason [ ]5. Lack of collateral [ ]6. Repayment schedule not favourable [ ]
7.Other …………………………………………..
Please respond to the following questions by writing 1 if yes, and 0 if noActivity Before WRS After WRS
(Last season)111. Has someone taken a loan and shared with you … …
before?(If no, skip to 114) … …
112. If yes, what was the amount received? … …113. What was the interest charged on the loan?114. Have you ever received money transfer (Remittance) … …
from abroad for your maize farming before? (If no, skipto 117) … …
115. If yes, when was the last time you received 1. Formal Bank [ ] 1.Formal Bank[remittance? 2. Credit union[ ] 2. Credit unio [
116. Through what type of financial institution did you 3. Rural Bank [ ] 3. Rural Bank [receive the remittance? 4. Microfinance[ ] 4. Microfinance[ ]
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Section F: Effect of WRS on Farmers’ Income
Information on Land
Activity Last Season Before After WRS (LastWRS Season)
117. Indicate the total area of yourfarmland
118. Indicate the size of land formaize
cultivation119. Do you rent your farm land? (If Yes [ ] No [ ] Yes [ ] No [ ]
no, go to 122) … …120. If yes, what is the cost of the … …
land (GH¢)?121. What is the duration of your
rent?122. Information on farm tools and equipment
Tools & Last season before WRS After WRS (Last Season)
Equipment
Number Unit Total Number Unit Total
owned Cost Cost owned Cost Cost
Cutlass
Hoe
Sickle
Spraying
machine
Animal drought
Axe
Other…
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123. Other costs of production
Activity Last Season Before After WRS (Last
WRS Season)
Seed
Fertilizer
Agro chemicals
Cost of hired equipment
Other …
Activity Last Season Before Last Season AfterWRS
WRS
124. Total cost of input used on farm
125. Have you enjoyed any subsidy before? ... …
126. If yes, indicate the amount of subsidy ... …
enjoyed (GH₵)
127. Total cost of labour in man days
128. Total bags of maize harvested (Kg)
129. Cost of packaging
130. Transportation cost
131. Storage cost
132. Interest paid on loan (if any)
133. Total bags of maize sold (Kg)
134. Price of 50kg bag of maize (GH₵)
135. Maize consumed by the family (Kg)
136. Maize reserved as seed for cultivation
137. Maize given out as gift (if any)
138. Did you pay tax on your produce sold? ... …
139. If yes, indicate the amount paid (GH₵) … …
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Institutional Analysis of WRS
Questionnaire to the Heads of Community Warehouses or Farmer Based Organisations
1. Have you received any assistance or had any form of business relations with the following institutions?
INSTITUTION / ORGANIZATION Yes Form of Paid or Last time
or Business or free received
No Assistance
Ministries of Food and Agriculture
Extension Officers
District Assembly
Ministry of Local Government and Rural
Development
Ministry of Trade and Industry
Ghana Grains Council
Financial Institutions
Ghana Standards Authority
Purchase For Progress (P4P) Marketing
Institution
World Food Programme (WFP) in Ghana
National Food Buffer Stock Company
(NAFCO)
Savanna Marketing Company (SMFC)
Premium Foods
Tamale Teacher Training College
Other …
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2. Do you need any policy that will help improve your farming activity?1. Yes [ ]
3. If yes, which aspect of farming activity do you require the policy to improve
…………………….………….
4. Has MOFA supported in any way to develop your FBO? 1. Yes0. No5. If yes, what kind of support did you receive?
………………………………………………………………….
6. How does the community WRS operates?7. How many members do you have in your organization
………………………………………………
Interview Guide Questionnaire to Warehouse Operators
1. What are the treatment procedures that maize goes through before they are stored
in the warehouse?
2. What is the moisture level of maize stored in the warehouse?
3. Do you have established standards of maize in place?
4. If yes, what are the types of grading or standards of maize that guide your
operation?
5. How does the WRS operate in Ghana, in terms of financial accessibility and sale
of goods in stock?
6. Who are the actors involved in the WRS?
7. Do you have insurance package for your warehouse?
8. If yes, what is the maximum or minimum amount given to your customers by the
insurance company in case of catastrophe?
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9. Have you ever faced any catastrophe before?
10. If yes, what was it?
11. What type of WR do you use (Manual or Electronic)?
12. What are the minimum tonnes or number of 50kg bags of maize required to obtain
WR?
13. What are the current charges of storage of maize in the warehouses?
14. How many community warehouses do have in the Northern region?
15. What are the marketing institutions who normally buy maize form the system?
16. What is the shelf life of stored maize or the expiring date of WR of maize?
17. Have you received any form of assistance from MOFA before? Yes [ ] No [ ]
18. If yes, what form of assistance did you receive?……………………………………………
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INVESTMENT ANALYSIS OF CERTIFIED WRS
Table 1: Capital CostItem Quantity Unit Cost Total Cost
Warehouse
Office Space
Computers
Weighing scale
Vehicles
Other…
Table 2: Monthly Operating Cost for the year 2015Item Quantity Unit Cost Total CostLabourDriverSecurityWarehouse operatorFuelChemicalsTransportationMaintenanceFuelPublicityPackagingElectricityCommunicationOther …
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Table 3: Total Revenue From storage for the year 2015Month Total Revenue
January
February
March
April
May
June
Jyly
August
September
October
November
December
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Interview Guide Questionnaire to Financial institutions
1. Do you have loan package for smallholder farmers
2. If yes, what are the criteria used to issue loans to smallholder farmers?
3. What is the interest rate charged on loans to smallholder farmers?
4. Do you have any collateral arrangement for smallholder farmers?
5. If yes, what form of collateral is acceptable to issue loans to smallholder farmers?
6. Do you know about the operations of warehouse receipt system in Ghana?
7. How did you know them?
8. Has a farmer ever requested for loan using warehouse receipt or Goods received
note as collateral?
9. If yes, has a farmer ever been successful in obtaining a loan using the WR?
10. If yes, what is the %age value of goods in stock that are given to farmers as loans?
11. What is the duration of repayment of such loans given to farmers?
12. Have you ever encountered any problem with farmers who took loans from your
bank using WR?
13. If yes, what was the problem?
14. Do you have mechanism in place that monitors prices of commodities in stock
that are used as collateral for loans?
15. How do you determine that commodities used as collateral for loans exist in the
warehouses?
16. What is the risk mitigation strategies used to minimize losses when loans are
issued to farmers who participate in the WRS?
17. Are you willing to accept “Goods Received Note” (GRN) with special security
features as collateral to give loans to smallholder farmers?
18. If no, why
19. What do you need to be put in place to make GRN or WR acceptable for loan
consideration?
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Interview Guide Questionnaire to MOFA
1. Do you normally provide extension services to smallholder maize farmers in the
Northern region?
2. If yes, when was the last time such service was given to the farmers?
3. What form of intervention have you made recently to help increase productivity
of smallholder maize farmers in the Northern region?
4. Do you help develop the F.B.Os in the Northern region?
5. If yes, what have you done recently to help develop the F.B.Os in the Northern
region?
6. Do you know about the operations of warehouse receipt system in Ghana?
7. How do you know them?
8. Have you ever provided any assistance to help develop the WRS in Ghana, with
respect to:
a. Linking smallholder maize producers who participate in the system at the
community warehouses to public and private institutions who buy maize in large quantities?
b. Helping the smallholder farmers who participate in the system gain access to
finance from formal or semi-formal financial institutions?
c. Building public grain warehouse facilities to be used for the WRS to attract
more smallholder farmers.
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Interview Guide Questionnaire to the District Assemblies
1. Do you know about the operations of warehouse receipt system in your district?
2. How did you know them?
3. Have you ever provided any assistance to help develop the WRS in Ghana, with
respect to:
a. Linking smallholder maize producers who participate in the system to public
and private institutions who buy in large quantities?
b. Helping the smallholder farmers who participate in the system gain access to
finance from FFIs?
c. Building public grain warehouse facilities to be used for the WRS to attract
more smallholder farmers?
4. Have you developed road networks in the communities to link farms to markets or
warehouses?
5. If yes, what is the condition of those roads?
6. If no, do you have plans of constructing roads to link farmers from their farms to
the market or warehouses?
7. Do you have well established markets in the farming communities?
8. What is the state of other infrastructural development such as electricity and
telecommunication in the farming communities?
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Interview Guide Questionnaire to the Ghana Standards Authority
1. Have you developed standards or grading system of maize in Ghana?
2. If yes, what are the categories of standards or grades of maize?
3. Do you know about the operations of warehouse receipt system in Ghana?
4. If yes, do you have any collaboration with the GGC to develop the WRS in
Ghana?
5. What have you done to ensure successful operation of the WRS in Ghana?
6. Are you able to extend regulatory oversight to ensure that smallholder farmers
who are participants of the community warehouse system also follow the established standards
of maize in their marketing?
Interview Guide Questionnaire to the GGC
1. What are the promotional activities that were used to create awareness of the
WRS in Ghana?
2. What is the status of outreach activities of the programme?
3. Has the participation of smallholder maize producers in the system been
encouraging?
4. What is the minimum tonnes (or number of 50kg bags) of maize required to gain
WR?
5. Are you able to effectively extend regulatory oversight to the community
warehousing system?
6. If yes, what have you done recently to ensure successful operation of the
community warehouses?
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7. Have you been able to integrate specific public or private institutions into the
WRS who buy maize in large quantities, especially from the community warehouses?
8. If yes, what are the names of those market institutions?
9. Have you helped develop standards as well as weight and measures of grains for
the community warehouse receipt system?
10. If no, do you have any intention of developing it?
11. Are you able to help disseminate market price information to the smallholder
farmers?
12. If yes, how do you do it?
13. If no, why not?
14. Which financial institutions are involved in the WRS in Ghana?
15. Is the WRS able to empower smallholder farmers to access financial services?
16. If not, what are you doing to empower them to obtain financial services through
WRS?
17. What role is played by the farm input dealers who are members of the WRS?
18. Why is the warehouse receipt not transferable in Ghana?
19. What is needed to make the warehouse receipt transferable, and what are you
doing to achieve that?
20. Do you have any other interventions that are made to help increase the
productivity of smallholder maize producers who are participants of the WRS?
21. What are the legislations needed in Ghana to make the operation of WRS
successful.
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22. Which of those legislations are already in place?
Interview Guide Questionnaire to Ministry of Trade and Industry
1. Do you know about the operations of warehouse receipt system in Ghana?
2. How did you know them?
3. Have you ever provided any assistance to help develop the WRS in Ghana, with
respect to linking smallholder maize producers who participate in the system to public and
private institutions who buy in large quantities?
4. Are you able to provide information on prices of commodities to all market
participants?
5. If yes, through what medium do you provide the market information?
6. Do you have any intervention to control excessive food price variability in the
Northern region of Ghana?
7. If yes, what are some of the interventions made?
