Financial Viability of Rubber Production: Empirical Evidence from Ghana

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John K. M. Kuwornu Elikem A. Adanu George T-M. Kwadzo

Abstract

This study examined the financial viability of rubber production in the Ahanta West District in the Western Region of Ghana. Multistage sampling technique was used to solicit primary data on costs and returns associated with rubber production from smallholder rubber farmers whose farms are in latex production. Secondary data regarding climatic and soil conditions were solicited to augment the primary data. Discounted Cash Flow analysis revealed that rubber production was financially viable at the Rubber Outgrower Unit’s loan interest rate of 11.5% per annum while production was not financially viable at the Agricultural Development Bank’s loan interest rate of 30% per annum. The constraint analysis revealed that uncompetitive rubber price was the most constraining institutional factor while high cost of labour was the most constraining production factor. The study recommends that, in order for farmers to benefit from rubber production, farmers should obtain loans from the Rubber Out grower Unit as loans offered by the Commercial Banks were associated with interest rates higher than the Internal Rate of Return of 13%.

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References

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