Ghanaian rice farmers need finance for new technology, but banks don’t trust them


New agricultural technologies have the potential to improve livelihoods and food security in sub-Saharan Africa. Better seed varieties, soil fertility practices, and pest management can all increase productivity. A report by the United Nations Development Program indicates that the region’s agricultural growth is more effective than other economic sectors when it comes to eradicating hunger and reducing poverty.

Steps have been taken over the decades to improve farmers’ access to improved seeds and technologies that are essential to boost agricultural transformation on the continent. Efforts have been made at local, national and regional levels by government and donors.

But studies continue to show that the rate of adoption of modern technologies is low among farmers in the region. This situation has resulted in low agricultural productivity, high levels of food insecurity and rural poverty. Over 65% of households in sub-Saharan Africa are mainly smallholder farmers, many are poor and vulnerable.

Small farmers in the region have a common problem. They tend not to have access to the funding they need to adopt modern technologies. Funding can take the form of loans or credits.

Using the case of rice farming in Ghana, we conducted a study to understand the challenges smallholder farmers face in accessing loans. We wanted to know if this was preventing them from adopting modern technologies and if these technologies would improve their productivity and income.

We have found that banks and financial institutions do not trust small farmers. They relay their mistrust by asking, for example, for huge guarantees, high savings capital and a high interest rate for agricultural loans. There are also generally long delays in accessing funds.

We suggest mechanisms to improve access to finance that would help farmers to produce more rice.

Our research

We interviewed 100 smallholder rice farmers in Shia-Osuduku district in the Greater Accra region of Ghana. In focus group discussions and interviews, we asked about access to credit and loans and how this influenced their use of modern production technologies.

We focused on rice farmers because rice is the second food crop in Africa. Rice is also an important source of income for rural farmers. In Ghana, rice is the second most important cereal and is quickly becoming a cash crop for many farmers. Demand for rice in Ghana is expected to grow at a compound annual growth rate of 11.8%.

At present, most of the rice farmers are planting old seeds of rice varieties using broadcast sowing. These give low yields compared to those using modern technologies. These technologies include new varieties of rice, a high-capacity thresher for rice, a mobile application called RiceAdvice which provides advice on rice cultivation, mechanical weeders that could reduce the labor force in rice production, and local advice to farmers for nutrient management.

These farmers are optimistic that if they can access these technologies, they will achieve better yields and improve their livelihoods, but said in a panel discussion:

We are poor farmers and cannot afford these technologies unless we get financial support from the government or get loans from banks to invest in these technologies.

Another farmer said:

If you are lucky and get the money from the bank on time and invest it in modern technology, you are sure to get a good return.

Our study found that the biggest barrier to farmers accessing loans from banks and village savings companies is the inability of smallholder farmers to repay loans when the harvest fails or they experience crop losses. after harvest. A situation that will likely be reduced to near zero when farmers adopt modern rice technologies that have also proven to be climate smart.

These financial institutions, usually village savings and loan groups, microfinance companies or rural banks, do not trust farmers to repay their loans. So they use certain tactics to avoid granting loans. For example, they are unwilling to share information about innovative financial products. Or they insist that farmers have huge savings capital before borrowing. Some financial institutions require outrageous guarantees and several guarantors for credit. Others charge high interest rates beyond the 31% average interest rate set by the Bank of Ghana in 2017.

Some institutions impose unnecessary bureaucratic delays in processing loans to small farmers.

Microfinance companies and rural banks are more willing to approve credit facilities and loans to non-agricultural sectors than to smallholders. Nonetheless, our study shows that farmers who invest in modern technologies such as improved seeds and fertilizers see increased yields and household incomes, and are able to repay their loan on time.

Overall, 88% of rice farmers surveyed said their inability to adopt modern technologies to improve productivity and achieve household economic well-being was linked to their lack of access to loans to invest in these technologies.

What we recommend

To improve the access of small farmers to loans, the government must support the sector. It can introduce agricultural insurance policy systems to reduce the risk of loan default in the event of crop failure. This is essential to fight against the mistrust of financial institutions towards small farmers.

Small farmers should also develop a culture of savings and join associations of farmer groups to collectively negotiate loans from financial institutions.

Read more: Climate change is affecting the livelihoods of agrarian migrants in Ghana. This is how

Innovative solutions such as a warehouse receipt financing system that allows farmers to deposit their harvest in a certified warehouse and then be issued with a document called a warehouse receipt that they can use to access loans from farmers. financial institutions, would eliminate two obstacles: the lack of savings and the lack of guarantees and guarantees.

Banks and other financial institutions must employ innovative ways to reduce bureaucracy in processing loan facilities. They should do more to educate farmers on their processes and requirements for obtaining loans before the onset of the rainy season. This is essential to enable smallholders to prepare adequately before applying for credit.


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