Ghana’s agricultural sector continues to struggle with limited access to bank financing despite repeated policy interventions aimed at de risking lending to farmers and agribusinesses.
According to Professor Peter Quartey, the challenge has become a major constraint to efforts to modernise agriculture and achieve sustainable food security. He argues that while agriculture remains central to livelihoods, inflation management and national growth, the sector is still treated by banks as excessively risky.
Professor Quartey, who is Director of the Legon Centre for International Affairs and Diplomacy and a former head of the Institute of Statistical, Social and Economic Research, says lending levels to agriculture remain far below expectations. This, he notes, is happening even among financial institutions that were specifically mandated to support the sector.
Banks remain cautious despite policy support
Government has over the years introduced several interventions to encourage banks to increase credit to agriculture. One of the flagship measures is the Credit Risk Sharing system, which was designed to reduce the exposure of banks when lending to farmers and agribusinesses.
The idea, he said was to share potential losses between the state and financial institutions, thereby making agriculture more attractive to lenders.
However, Professor Quartey believes the policy has not delivered the desired results. According to him, the underlying risks that banks associate with agriculture have not been sufficiently addressed. Climate variability, price volatility, weak insurance penetration and poor farm level data continue to make the sector unattractive to commercial lenders, even with risk sharing arrangements in place.
ADB falls short of its mandate
To illustrate the depth of the problem, Professor Quartey referenced the experience of the Agricultural Development Bank Ghana, which was established to play a leading role in financing agriculture. He recalled that ADB had at one point committed to allocating a significant portion of its loan portfolio to the sector, but this target was never achieved.
“I recall ADB, for instance, said they were to give up to about 50% of their portfolio to agriculture. That did not happen. At most, they were able to get to 23, 24%. Why is that the case? Agric is high risk.”
Professor Quartey
For Professor Quartey, the failure of even a specialised bank to meet its agriculture lending target highlights the depth of the structural challenges facing the sector. It also raises questions about whether existing policy tools are fit for purpose.
High risk perceptions still dominate
At the heart of the problem, according to Professor Quartey, is the persistent perception of agriculture as a high risk venture. Weather shocks, post harvest losses and weak market linkages often translate into irregular cash flows for farmers, making loan repayment uncertain. Banks, driven by the need to protect depositors’ funds, therefore prefer sectors with more predictable returns.
He explained that while the Credit Risk Sharing system was meant to cushion banks against these uncertainties, it has not gone far enough to change lending behaviour. In practice, many banks still price agricultural loans at high interest rates or impose stringent collateral requirements that smallholder farmers cannot meet.
Professor Quartey warned that the continued neglect of agriculture financing has broader macroeconomic implications. Without adequate and consistent credit flows, efforts to boost productivity, adopt modern farming techniques and expand value addition will remain limited. This, he stressed, has a direct impact on food supply and prices.
Agriculture plays a critical role in Ghana’s inflation dynamics, particularly food inflation, which disproportionately affects low income households. Limited investment in the sector also undermines rural livelihoods and slows national economic growth.
Call for structural reforms
Beyond risk sharing schemes, Professor Quartey urged policymakers and financial institutions to confront the deeper structural problems holding back lending to agriculture. These include strengthening agricultural insurance, improving data on farmers, investing in irrigation and storage infrastructure, and promoting stronger linkages between farmers and off takers.
“We need to see more support for agriculture,” he said, adding that both government and banks must rethink how to reduce risk and expand credit to farmers who contribute significantly to Ghana’s economy.
According to him, without a more holistic approach to managing risk in agriculture, financial institutions will continue to fall short, and Ghana’s ambition to modernise its agricultural sector will remain elusive.
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