Assessing performance of micro and small scale Agribusinesses in Northern Ghana: Non-Financial and Stochastic frontier analysis

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The need for the reduction in poverty status of rural people through the development of agribusiness is of paramount concern to most governments. Agribusiness in Africa is considered the catalyst for economic growth and poverty reduction. It is a business solution to rural poverty if redistribution mechanisms work. From literature reviewed, the importance of agribusiness to the development of Ghana is quiet clear however much is not being done to develop agribusiness. The broad question is whether, they are doing well. The main objective of this study is to assess the financial and non-financial performance of micro and small agribusinesses in Ghana. This study analysed the performance of micro and small agribusiness. Performance was assessed in two dimensions; through the non-financial method and profit efficiency using the stochastic efficiency frontier model. With the non-financial method, it was clear that the entrepreneurs achieved most of the objectives that were identified. Each objective scored below 50%, hence the level of satisfaction was fairly distributed and not concentrated on some few objectives. The level of success was low. The average measure of profit efficiency of 60.0 percent was recorded in the area. This suggests that an average of about 60 percent of potential maximum profit is gained due to production efficiency, while the remaining short fall of discrepancy between observed profit and the frontier profit can be attributed to both technical and allocative inefficiencies. The variables in the inefficiency model that have negative coefficients, meaning that as these variables (educational level, farming experience, and household size) increase the profit efficiency of the farmer increases. Whiles the variables (sex of proprietor and age) are positive and hence vice versa. The positive coefficient of age is in agreement with the work of Abdulai and Huffman (1988) while the negative coefficient of educational level was in conformity with Kumbhakar and Bhattacharya (1992b), Ali and Flin (1989), Abdulail and Huffman (1988) and Huffman (1974). The result of this study has clearly shown that employing the stochastic profit frontier model allows a detailed analysis of the determinant of specific farm efficiency. The average profit efficiency of 0.601 suggests that considerable amount of profit is gained among maize producers in the sampled area.
A Dissertation Submitted to Department of Agricultural Economics, Agribusiness and Extension, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirements for the degree of Master Of Science.