Creating credit opportunities for rural farmers in Ghana

Financial institutions in Ghana are reluctant to lend to farmers due to the associated high risk. The risk emanates from uncertain weather conditions, which affect crop productivity and sales, limited savings of farmers and the difficulty in ascertaining their credit profile.

Most economic activities of rural and smallholder farmers in Ghana are poorly documented. This makes it arduous for financial institutions to access financial information about the farmer, to understand his/her economic activities and credit risks, and to provide them with the needed assistance.

As a result, farmers usually rely on other sources like moneylenders, purchasing clerks and rural banks to secure loans, which they are unable to repay because of the high-interest rate.

This continues to leave smallholder farmers, especially women, trapped in poverty and unable to purchase farm inputs and machinery to increase productivity.

The establishment of savings and loans groups, such as the Village Savings and Loan Association by Solidaridad, has been one answer to this challenge. However, to provide a holistic answer to the situation, Solidaridad through its Satellite for Business project, which is an interactive digital platform, is facilitating access to finance for smallholder cocoa and oil palm farmers by providing farmers’ credit scores to lending institutions to aid credit decisions.

The platform is also providing geobased data (the location of the farmer, farm size, and total yield) to financial service providers. It will also provide agricultural advice, farmer improvement model and market information to smallholder farmers to enable them to enhance productivity and improve incomes.

Funded by the Netherlands Space Office, the three-year (2019-2022) project is expected to reach 141,400 smallholder cocoa and oil palm farmers in seven regions in Ghana.

By 2022, the project seeks to contribute to increased food production, income and job creation for smallholder farmers by linking them to productivity interventions and the formal financial services sector for support.

“So far, we have profiled and assessed the credit risk of over 50,000 consented farmers in the Eastern, Central, Western, Western North, Ashanti, Bono and Ahafo regions of Ghana,” says Akua Benewaa, programme coordinator for Satellite for Business project.

She says the data will be used to create tailored and low-risk portfolios for bankable smallholders.

Access to farmer improvement services and agricultural information

Under the project, farmers will receive text messages, calls and voice messages on crop management, pruning, pest management, chemical applications, harvesting and post-harvest handling, financial literacy, and prices of food crops.

The platform will help farmers to access farm improvement tools and services, as well as general public training through radio and call centres on climate change adaptation and mitigation for cocoa and oil palm.

Benefit for service providers

With the available data on the platform, credit institutions, input dealers, micro-pensions, and micro-insurance providers will be able to reach a significant customer base in a cost-effective manner.

Prior to the project implementation, Solidaridad carried out a comprehensive user needs assessment in 2018 among key stakeholders in the oil palm and cocoa supply chains to establish the key geodata requirements needed to improve the production of the two commodities and to carry out credit risk analysis through satellite data.

Creation of a sustainability model
To promote the sustainability of the project, Solidaridad will establish a FinTech company that owns and deploys services to identified actors and clients from the platform.

The services will include Geographical Information Systems and weather information, farmer improvement services, client identification and onboarding tools.

The services would be deployed based on subscriptions for the farmers’ credit scores that will be generated by the FinTech Company; brokerage fees and discounts from input dealers; agent fees from insurance and pension companies and other entities that offer value-added services to farmers.

Implementing partners

The Satellite for Business project is implemented by Solidaridad and a consortium of partners. They include Solidaridad Europe (Netherlands), Satelligence (Netherlands), Akvo (Netherlands) Esoko Ghana, Financial Access (Netherlands) and Ghana’s Ministry of Food and Agriculture.

The project is also partnering Pan African Savings & Loans, People’s Pension Trust, MicroEnsure, Sustainability Services Limited, Rural Service Centers, Mobile Network Operators, Input dealers, Tree Crop Development Authority, Ghana Cocoa Board, Ghana Data Protection Authority and the Oil Palm Development Association of Ghana for successful implementation.

The Satellite for Business project is in line with Solidaridad’s impact investment and innovation financing strategy, which seeks to create a pipeline of investable propositions that directly or indirectly lead to yield improvement, lower costs, increased efficiency, better quality of produce, and access to markets for farmers.