Impact of Credit Guarantee System of GIRSAL on Employment by Agribusiness Firms

Abstract

The study examined the impact of a major Credit Guarantee System - Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL) - on employment by agribusinesses in Ghana. Endogenous switching regression model was applied to survey data collected from 353 agribusiness firms (71 beneficiary and 282 non-beneficiary) across 12 administrative regions of Ghana. The study found that the beneficiary Agribusinesses fully engaged an average of five more employees than non-beneficiary agribusinesses. Considering the period of this research, in the middle of 2020, with all the ramification of COVID 19 on agribusinesses, including slowdown in market activities, five employees is a very remarkable number. Findings from the endogenous switching regression model show that the main factors that affect agribusiness’ participation in GIRSAL’s credit guarantee system are education level of the agribusiness owner, membership of farmer-based association and years of experience in agribusiness. On average, every agribusiness firm participating in the system has the potential to increase employment by 34 full time workers per annum. To sustain the positive impact of GIRSAL’s credit guarantee system, agribusinesses should be encouraged to join farmer-based associations for consistent learning. Policy makers should improve the agribusiness environment to encourage the formation and operation of more credit guarantee schemes.