Ghana’s rice farmers want finance for brand new applied sciences, however banks do not belief them

DeAgostini/Getty ImagesNew farming applied sciences have the potential to enhance livelihoods and meals safety in Sub-Saharan Africa. Higher seed varieties, soil fertility practices and pest administration can all improve productiveness. A United Nations Improvement Programme report says development within the area’s agriculture is more practical than different financial sectors relating to ending starvation and decreasing poverty.

Steps have been taken over many years to boost farmers’ entry to improved seeds and applied sciences which are important to stimulate agricultural transformation on the continent. The efforts had been at each native, nationwide and regional ranges by authorities and donors.

However research proceed to indicate that the adoption charge of recent applied sciences is low among the many area’s farmers. This example has resulted in poor agricultural productiveness, high-levels of meals insecurity and rural poverty. Over 65% of the households in Sub-Saharan Africa are primarily smallholder farmers, many are poor and susceptible.

Smallholder farmers within the area have a standard drawback. They have a tendency to lack entry to the finance they should undertake trendy applied sciences. Finance could possibly be within the type of loans or credit score.

Utilizing the case of rice farming in Ghana, we carried out a examine to grasp the challenges smallholder farmers face in accessing loans. We wished to seek out out if this was stopping them from adopting trendy applied sciences, and whether or not these applied sciences would enhance their productiveness and incomes.

We discovered that banks and monetary establishments don’t belief smallholder farmers. They relay their distrust by, for instance, requesting outrageous collateral, a excessive sum of financial savings capital, and a high-interest charge for agriculture loans. There are additionally often lengthy delays in accessing any funds.

We recommend mechanisms to enhance entry to finance that will assist farmers produce extra rice.

Our analysis

We interviewed 100 smallholder rice farmers within the Shia-Osuduku district within the Better Accra area of Ghana. In focus group discussions and interviews, we requested about entry to credit score and loans, and the way this influenced their use of recent manufacturing applied sciences.

We targeted on rice farmers as a result of rice is the second most essential meals crop in Africa. Rice can also be a big supply of revenue for rural farmers. In Ghana, rice is the second most essential cereal and is quick changing into a money crop for a lot of farmers. Rice demand in Ghana is projected to develop at a compound annual development charge of 11.8%.

In the mean time, most rice farmers are planting previous rice selection seeds utilizing broadcast seeding. These give poor yields in comparison with these utilizing trendy applied sciences. Such applied sciences embody new rice varieties, a high-capacity thresher for rice, a cellular utility known as RiceAdvice that gives recommendations on rice farming, mechanical weeders that might cut back labour in rice manufacturing, and localised farmer recommendation for nutrient administration.

These farmers are optimistic that if they’ll entry these applied sciences, they’ll receive higher yields and enhance livelihoods however mentioned throughout a spotlight group dialogue:

We’re poor farmers and can’t afford these applied sciences except we get some monetary assist from authorities or we get loans from banks to put money into these applied sciences.

One other farmer mentioned:

If you’re fortunate and also you get cash from the financial institution on time, and also you make investments it in trendy applied sciences, you’re positive of a superb yield.

Our examine revealed that the best impediment to entry loans from banks and village financial savings corporations by farmers is the lack of smallholder farmers to pay again loans when the harvest fails or they endure post-harvest crop losses. A scenario that’s more likely to be lowered to close zero when farmers undertake trendy rice applied sciences which were confirmed to be climate-smart as nicely.

These monetary establishments, often village financial savings and mortgage group, microfinance corporations or rural banks don’t belief that farmers will be capable of repay loans. So that they use sure techniques to keep away from granting loans. For instance they’re unwilling to share details about modern monetary merchandise. Or they insist on farmers having enormous quantity of saving capital earlier than borrowing. Some monetary establishments demand outrageous collateral and a number of guarantors for credit score. Others impose excessive rates of interest past the 31% common rate of interest set by the Financial institution of Ghana in 2017.

Some establishments erect pointless bureaucratic delays to course of loans for smallholder farmers.

Microfinance corporations and rural banks are extra keen to approve credit score amenities and loans to non-agricultural sectors than to smallholder farmers. However, our examine reveals that farmers who put money into trendy applied sciences equivalent to improved seeds and fertiliser see a rise in yields and family revenue, and are capable of pay again their mortgage on time.

Total, 88% of the rice farmers interviewed mentioned their incapability to undertake trendy applied sciences to enhance productiveness and obtain family financial well-being was linked to their lack of entry to loans to put money into these applied sciences.

What we suggest

To enhance smallholder farmers’ entry to loans, authorities should present assist for the sector. It may possibly introduce agriculture insurance coverage coverage programs to scale back the chance of non-payment of loans if harvests fail. That is important to addressing distrust by monetary establishments of smallholder farmers.

Smallholder farmers must also develop a saving tradition and be part of farmer group associations for collective bargaining for loans from monetary establishments.

Learn extra:
Local weather change is affecting agrarian migrant livelihoods in Ghana. That is how

Revolutionary options equivalent to a warehouse receipt financing system that enables farmers to deposit their harvest in a licensed warehouse after which be issued with a doc known as warehouse receipt that they’ll use to entry loans from monetary establishments, would tackle two obstacles: lack of financial savings and lack of collateral and guarantors.

The banks and different monetary establishments should make use of modern methods to scale back the paperwork in processing mortgage amenities. They need to make extra effort to coach farmers about their processes and necessities to amass loans earlier than the onset of the wet season. That is essential to allow smallholders to arrange adequately earlier than making use of for credit score.

Philip Tetteh Quarshie receives funding from the Canada First Analysis Excellence Fund, and the Division of Geography, Atmosphere and Geomatics, College of Guelph, Ontario, Canada. He’s additionally affiliated with the Guelph Institute of Improvement Research, College of Guelph, Ontario, Canada

Evan Fraser receives funding from each Canadian and Provincial governments and the Arrell Household Basis. He’s affiliated with the Canadian Meals Coverage Advisory Council, the Maple Leaf Centre for Motion on Meals Safety and the European Commissions Excessive Degree Knowledgeable Group on Meals Methods Science.