Transforming the Agrifinance Market System in Ghana
This blog was submitted by Palladium.
Ghana has an agrarian, developing economy founded on smallholder farmers who are struggling to get out of poverty. Access to finance is consistently cited as the main barrier that inhibits growth in the agriculture sector. The government of Ghana and donor agencies tried to increase access to finance and investment for Ghana’s agribusiness, but a large gap remained. Many financial institutions viewed agriculture as inherently risky and perceived small and medium-sized enterprises in agriculture as an unprofitable market segment.
The Financing Ghanaian Agriculture Project (FinGAP) simultaneously addressed barriers that limited financing by focusing on restructuring Ghana's agrifinance ecosystem. We worked with smallholder farmers, agribusinesses, business advisory service providers, and financial institutions, and designed incentives to stimulate the flow of finance to the agriculture sector.
We focused on key three processes:
1. Realigning incentives: We designed a pay-for-results approach for both financial institutions and business advisory service providers to address both the supply and demand sides of agricultural finance.
2. Improving skills and knowledge of system actors: We provided more than 9,000 hours of training and technical assistance so project partners could take advantage of new incentives.
3. Building mutually beneficial partnerships and business relationships: we helped incubate dozens of strategic partnerships to provide stable markets and continuous supply chains.
At the end of five years, there was a 344% increase in the number of farmers receiving loans and FinGAP unlocked $260 million in new financing. This created a market where financial institutions now compete — in the absence of donor funding — for market position in agrifinance.
Palladium implemented FinGAP from 2013 to 2018 for USAID.
You can read the FinGAP positive impact case study on Palladium's website, or download it below.