Financing smallholder Ghanaian farmers

Most financial institutions in Ghana tend to rely on traditional forms of credit assessment.  This is the process flow for loan applications:

1/ Credit Risk officers screen a large pool of unbanked individuals  looking to access formal financing

2/ These customers, often referred to as “thin file”, are rejected due to the lack of information on how risk tolerant or risk averse they are when it comes to money.

One option for these financially underserved and unbanked persons is to take out loans with absurd interest rates ( Ghana has one of the highest interest rates on offer by financial institutions globally). Unable to pay back, these persons jeopardise their ability to receive formal finance in the future. It becomes a vicious cycle.

Loans are debts, and maturity dates must reflect lender and customer satisfaction and agreements. Many factors create payment challenges for the Ghanaian farmer. In the light of this lenders who are exposed to the market should be able to guide smallholder farmers as to what goes into the agreements.

In an interview with Mr Amanor Edward Kwao, a specialist in agricultural value chain, he clearly outlined the fact that Ghanaian farmers need long term investments for seasonal produce, irrigation for year round production, protection against crop and seasonal failures or hazards. “These are the areas lenders should be looking at”, he says.

“A check list of this nature could help farmers tailor loans to suit their products and not the blanket loan acquisition tests. Farm loans must help the farmer and the lender but not to mortgage payment,” Amanor Kwao stressed.

This article is by courtesy of mfarmPay, a data-driven credit product for African farmers.  We are onboarding smallholder farmers interested in mfarmpay product. Register today at:

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