Cocoa farmer in drying cocoa beans in rural Ghana. Image Credit: USAID
Agriculture, which encompasses farming and agri-SME domains, remains an essential economic activity in Ghana that employs a significant part of the population (SyeComp, 2019). With approximately 90% of farm holdings in Ghana of less than 2 hectares, Ghana’s agriculture is still dominated by traditional smallholder farming.
Majority of rural farmers, unfortunately, continue to be clearly excluded from accessing formal financing for on-and off-farm productivity investments. Notwithstanding the efforts of Government of Ghana and Bank of Ghana to encourage agricultural lending with initiatives like GCX and GIRSAL, less than 14% of rural farmers in Ghana gain access to formal and available credit. What are the core reasons for this low penetration of agricultural credit in Ghana?
mfarmPay Team, via the Farmer HelpLine Channel, embarked on a fact-finding mission to understand the limitations to accessing formal credit in agriculture in Ghana and to provide appropriate recommendations to enrich the formal credit environment for smallholder farmers in the country.
Running analysis of responses via 400 phone interviews and 150 WhatsApp interactions with individuals identified as rural farmers and 25% classified as urban farmers, we surmised the following key insights:
Constraints identified:
Lack of market-focus in producing commodities
Poor farming road networks
Unavailability of commodity collection points except for traditional export products like cocoa, shea, and cashew
Unstructured and institutionally weak farmer cooperative networks
Huge lack of end-to-end digital data and information use
Solutions:
Farmers need to go by first-principle approaches by being market focused in determining commodities to grow
Excellent investments in rural roads currently ongoing through various Government interventions
Opportunities in investing in packhouses and warehouses could be rewarding for public and private-sector actors and thus minimise post-harvest losses
Farmers should actively participate in cooperative networks in their communities or commit to join newly formed ones to have collective gains and market leverage for negotiations
Farm plots need to be digitised and integrated into market supply chains. This will create opportunities for farmers to access contextual market, weather, and crop-specific information support to enable them prioritise their farming activities
Although financial institutions remain reluctant to offer credit to smallholder farmers in Ghana, the expanding business opportunities and growing landscape of financial technology companies (fintechs) such as mfarmPay and agricultural technology companies (agtechs) in Ghana is expected to play a crucial role in unlocking smallholder farmer financing. Financial institutions are equally excited with the prospect of partnering with data-driven derisking solutions which utilises alternative data to build loan assessment profiles for rural smallholder farmers in Ghana.
We are happy to continue the conversation on smallholder farmers’ access to formal credit in Ghana. Send us your thoughts.
Email: hello@mfarmpay.com
WhatsApp the Farmer HelpLine: +233 500 000 996