Does Loan Size Matter in How Collateral Characteristics Relate to Credit Access?

Abstract

The study examined the moderating role of loan size on the relationship between collateral characteristics and access to credit by micro, small, and medium-sized enterprises (MSMEs) in the agricultural sector of the Ashanti Region of Ghana. In the agricultural sector, MSMEs engaged in crop, livestock, and fish farming constituted the population for the study. The study employed a quantitative research method alongside a causal research design. The Pearson multiple regression was employed to analyze the relationships among the study variables. The study found that collateral costs, registration, and insurance positively and significantly contribute to MSMEs’ credit access. Whereas loan size does not moderate the effect of collateral cost on farmers’ credit access, it negatively and significantly moderates the effect of collateral registration and insurance on credit access. Furthermore, loan size positively and significantly moderates the effect of collateral age on farmers’ access to credit. The study was restricted to MSMEs in crop, livestock, and fish farming in the Ashanti Region of Ghana, thus making generalization to the country and beyond difficult. This study is important for decision-making concerning how farmers could take advantage of their collateral to secure appreciable loans in the Ashanti Region of Ghana. No empirical study has examined the moderating role of loan size on the relationship between collateral characteristics and credit access, aside from the fact that empirical studies dominate other sectors other than the agricultural sector.