FARMERS are calling for single-digit agricultural lending rates backed with flexible procedures.
They said the current interest rate regime made it nearly impossible for smallholder farmers to access credit to increase production.
In an interview with the Graphic Business, a former Executive Director of the Peasant Farmers Association of Ghana (PFAG), Dr Charles Nyaaba, said although agricultural financing programmes often announced interest rates between 22 and 33 per cent, the reality on the ground was different, as the procedures, collateral requirements and processing delays made the loans inaccessible to ordinary farmers.
He stressed the need for Ghana to take inspiration from global best practices to realign its agriculture financing model.
“In Latin America and even in the United States, most agricultural loans fall below 10 per cent. In some cases, these countries combine the loans with other support facilities to motivate farmers to produce more. But in our case, it is not like that. The rates are too high, and the procedures too rigid,” he stated.
Dr Nyaaba added that the country would experience significant growth in the sector if short-term agriculture loans could be offered at below 10 per cent, while medium to long-term loans should not exceed 20 per cent.
“Those rates will be fine for farmers, but they must also be backed by flexible arrangements that allow real farmers to access them,” he said.
Limiting access
Beyond interest rates, he emphasised that the more pressing challenge was the complex and discouraging loan application process, especially for smallholder farmers and rural cooperatives.
According to him, many schemes designed to support micro, small and medium-sized enterprises, including agriculture, required extensive documentation and sometimes multiple layers of approval.
“We have institutions like the SME support schemes that subsidise loans for small businesses, but the procedures that farmers and SMEs must go through are very rigorous.
This makes it difficult for the majority of smallholder farmers to succeed,” Dr Nyaaba stated.
The situation, he said, was further compounded by a perception among banks that agriculture was a high-risk sector, adding that “the moment you walk into a bank and mention that you are into farming, you are immediately seen as a risk, which discourages many potential investors in the sector”.
Operating efficiently
Meanwhile, the President of the Concerned Farmers Association of Ghana (CFAG), Nana Oboadie Boateng Bonsu, renewed calls for sharply reduced lending rates for the agricultural sector, urging the government to introduce a two per cent interest rate on loans accessible to registered and recognised farmers.
He said the current credit environment—where interest rates range between 22 per cent and 33 per cent continued to undermine farmers’ capacity to operate efficiently, expand production and contribute fully to national food security.
“We want a single-digit interest rate, which is two per cent, to support farming activities. The current interest rate is unsustainable for the agric sector. Interest rates are almost 33 per cent, 22 per cent and 28 per cent,” he said, warning that the high cost of borrowing was constraining output and eroding profitability across the value chain.
He maintained that a two per cent credit regime would significantly enhance the implementation of the “Feed Ghana, Eat Ghana” initiative, strengthen rural livelihoods and improve the competitiveness of local produce.
An Agriculture Economist, Professor Irene Sussana Egyir, in a separate interview, called on farmers to establish their own cooperative banks to control interest rates on loans.
She said even ADB's current interest rate of 16 per cent was not farmer-specific, noting that the government could receive proposals for lower rates since all financial institutions were privately owned, with minimal state shares.
“If farmers save in their own cooperative bank, they can dictate the interest rate,” she stated, adding that while the Bank of Ghana (BoG) sets base rates, cooperative banking could offer farmers better terms than occasional government subsidies.
Agric dedicated policy
The Director of Policy and Advocacy at the Legal and Entrepreneurship Support Hub (LES Hub), Edward Kareweh, called for a fixed five per cent ceiling on agricultural lending rates to make credit genuinely accessible to farmers and agribusinesses.
He told the paper that agriculture should be treated as a priority sector, backed by a clear national policy that directed all banks to allocate a mandatory portion of their annual loan portfolios to agriculture.
According to him, high compound interest rates made long-term agricultural investments difficult to repay, especially as local produce competed with cheaper imports.
“If banks are mandated to channel at least 10 per cent of their total lending to agriculture at not more than five per cent interest, farmers can survive, repay and reinvest,” he said.
Mr Kareweh noted that many farmers could not even begin negotiations on interest rates because they were denied credit at the initial stage, stressing that a unified policy would ensure consistency across financial institutions and create predictable financing for the sector.
Such reforms, he said, would strengthen food security, attract investors into agriculture and reduce the heavy reliance on imported produce that continues to undermine local farmers.