The Minister of Agriculture, Honourable Dr. Akoto Afriyie, in an Accra-based radio station interview, said commercial banks in Ghana have not helped the agriculture sector.

Dr. Akoto Afriyie said Ghana’s rice sector needs a lot of investors primarily to provide milling machines to bridge the milling capacity gap in the country at the moment. Ghana’s milling capacity is only 450,000 metric tonnes if all the milling machines are put together. Meanwhile, Ghana’s paddy rice production reached 1.1 million metric tonnes in 2021. This means Ghana has less than half the milling capacity, and that’s why people from neighboring countries buy our paddy rice and mill them in their country, denying Ghanaian farmers the needed financial benefits, Dr. Akoto Afriyie added.

“The current milling capacity is still being underutilized because the banks refuse to give the millers working capital. The banks have not helped us. And I keep saying that the commercial banks in this country have vacated agriculture, and despite all the life we put into the sector, they have just been on the sidelines watching us. We have arranged a meeting with the commercial banks, the Governor, and the President for me to make the case to them because the government has done enough for farmers with the task payers’ money, and the commercial banks have to come in with an agricultural credit scheme.”
Dr. Akoto Afriyie

Like the Ghana Agricultural Insurance Programme (GAIP), which has provided agricultural insurance for Ghana since 2011, Commercial banks should have a farming credit scheme to support farmers in their farming venture. The GAIP, provided by a pool of 19 Ghanaian insurance companies, has developed the first agricultural insurance products for the country and now provides a risk management tool for the adverse effects of climate change and other risks to agricultural production.

Benefits of agricultural credit scheme

Credit is advanced because it helps improve the social relations that keep these farmers in a poverty situation. Access to credit facilities increases incomes in the short run and enables farmers to establish and expand their farms. The provision of credit also encourages farmers to use modern technologies and procure inputs for farm use, thereby increasing their productivity and income. It helps improve the standard of living of the poor by increasing food production, rising incomes, and permitting increased savings. Access to credit also enables farmers to acquire lands, inputs, and both skilled and unskilled labor and access good markets for their produce, resulting in an improved standard of living.

There seems to be strong demand because of these benefits of using credit, especially for agricultural credit. Nonetheless, farmers are disqualified from traditional loans due to high transaction costs, high-interest rates, and a lack of collateral and pay capacity.

Farming generally requires financial investment. For instance, rice farming requires substantial financial investment to cover operations from land preparation to harvesting and processing rice grains. Since access to institutional finance is very limited, most farmers are forced to search for financial services through informal channel. These channels limit these farmers to access the kind of credit they want.

To overcome the bottlenecks associated with credit access by farmers, commercial banks should institute a more flexible agricultural loan scheme tailored to suit the needs of farmers as a whole.