Farmers’Day25: Can farm-financing schemes close the credit gap amid elevated NPLs?

By Joshua AMLANU

The government is expanding a network of credit-guarantee schemes, subsidies and blended-finance programmes to pull banks back into agricultural lending as the sector grapples with some of the highest non-performing loan ratios in the economy. Whether these interventions can unlock the long-promised flow of capital to farmers will help determine if its food-security ambitions are achievable.

Agriculture remains the backbone of Ghana’s labour market and a stabiliser of household incomes, yet it attracts only a small share of commercial lending. Banks point to elevated credit risks, unpredictable weather, volatile commodity prices and poor borrower records.

The sector’s NPL ratio stood at 62.1 percent in 2025, far above the systemwide 19.5 percent recorded in October, according to the Bank of Ghana. And although the national NPL rate has eased from 22.7 percent a year earlier, the central bank says credit risks remain high, particularly within agriculture.

This disconnects between the sector’s importance and its access to capital underpins the government’s renewed push to use guarantees, subsidies and long-tenor loans to shift banks’ risk appetite. The financing challenge was central to the message delivered ahead of the 41st National Farmers’ Day, scheduled for December 5 in Ho under the theme “Feed Ghana, Eat Ghana, Secure the Future.”

Food and Agriculture Minister Eric Opoku said the theme reflects the pressure to strengthen food security and cut reliance on imports. He described the agenda as a collective responsibility and stressed that existing financing schemes must scale significantly if Ghana is to become self-sufficient. “It underscores the Ministry’s vision to ensure that Ghana produces what she eats and eats what she produces,” he said.

Guarantees to Reduce Bank Risk

A key financing tool is the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL), which provides guarantees covering up to 70 percent of the principal on loans issued by participating financial institutions. The scheme works with 38 lenders, including commercial and rural banks, to reduce losses in the event of default. Guarantees last 12 months and can be renewed for longer-term projects.

Programme officials say GIRSAL has helped banks re-enter value chains they previously avoided. The partial guarantee structure, they note, gives lenders confidence that a portion of their exposure is protected, although banks still require evidence of viable business plans and market access before applying for support.

The scheme does not cover interest payments — a provision meant to promote credit discipline and deter reckless lending. Analysts say this helps contain moral hazard by ensuring banks retain meaningful risk and maintain prudent underwriting standards.

Farmers seeking GIRSAL-backed loans must first apply through their banks. Lenders conduct project assessments and site inspections before requesting guarantee coverage. Programme managers say this sequencing is designed to keep lending decisions market-driven rather than subsidy-led.

Another channel is the Affordable Agricultural Financing for Resilience and Development (AAFORD) project, which offers about US$14 million in blended finance to support production, marketing and value addition. The initiative targets farmers and processors unable to meet conventional collateral requirements.

People familiar with the fund say AAFORD fills a financing gap for activities banks see as too risky or small-scale, combining concessional financing and grants to strengthen resilience against climate and price shocks.

The Agricultural Development Bank (ADB) also continues to provide specialised agribusiness loans, often processed closer to the farm through branch visits. These products remain one of the few commercial options available to producers in rural areas.

A wider push to expand production

The financing discussion comes as government rolls out large-scale production programmes under the 2026 Budget. Agriculture has been positioned as a central pillar of the economic transformation agenda, backed by expanded input distribution, new irrigation projects, mechanisation support and tree-crop development.

Under the Feed Ghana Programme, the government distributed 2,000 metric tonnes of hybrid maize seed, 1,000 metric tonnes of rice seed and 50,000 metric tonnes of fertiliser in 2025. Planned distribution for 2026 includes 31,000 metric tonnes of rice seed, more than 164,000 metric tonnes of fertiliser and additional agrochemicals.

The Ministry expects these interventions to stabilise yields and ease food inflation — one of the strongest drivers of overall consumer prices. Officials say access to finance must improve if farmers are to effectively absorb the increased supply of inputs.

At the same time, major irrigation works under the Irrigation for Wealth Creation Initiative and the Afram Plains Economic Enclave are underway across thousands of hectares. Government says year-round production is essential to reduce import dependence and support a more stable exchange rate.

Oil palm: A long-term financing test case

One of the flagship financing interventions is the US$500 million Oil Palm Development Finance Window, announced under the National Policy on Integrated Oil Palm Development (2026–2032). The facility will provide long-tenor loans aligned with the crop’s growth cycle and includes a five-year moratorium on principal and interest payments.

Officials say oil palm’s long gestation period makes commercial loans unworkable without concessional terms. Conventional bank loans, they note, are mismatched to a crop that takes up to seven years to reach full maturity.

The facility — developed with the World Bank, development finance institutions and the Development Bank Ghana — will finance up to 70 percent of project costs. Government expects the approach to attract private investment, cut Ghana’s annual US$200 million palm oil import bill and support more than 250,000 jobs across the value chain.

Smallholders are expected to benefit through an outgrower scheme linking them to nucleus estates and processors, supported by subsidised seedlings, mechanisation services and guaranteed off-take agreements.

Mechanisation and market access

To reduce production costs, government is rolling out Farmer Service Centres across 50 agricultural districts. More than 4,000 machines — including tractors, planters, boom sprayers and combine harvesters — will be deployed to support producers. Officials say improved mechanisation should raise productivity and strengthen farmers’ credit profiles over time.

An additional GH¢200 million has been released to the National Food Buffer Stock Company to buy excess produce and stabilise incomes for crop and poultry farmers facing market gluts. President John Mahama has also directed schools to purchase locally produced rice, maize, chicken and eggs — a measure designed to guarantee demand for local producers.

Although most financing debates focus on crops, fisheries and aquaculture operators are seeking more targeted credit as well. Fish accounts for about 60 percent of Ghana’s annual protein intake. Officials say access to affordable financing for hatcheries, processing facilities and cold storage is critical to meeting rising domestic demand.

Can these schemes close the credit gap?

The central question — whether these interventions can meaningfully close the agriculture credit gap — remains unresolved.

Guarantees, subsidies and blended finance have widened the pool of bankable farmers. Banks say GIRSAL has reduced uncertainty and made it easier to extend credit to previously risky value chains. Some institutions report modest growth in agriculture loan portfolios after years of stagnation.

But the underlying risks remain substantial. High NPL ratios, weak bookkeeping, climate variability and price shocks continue to undermine loan performance. Analysts say credit schemes alone will not be enough without improvements in irrigation, storage, logistics and market access.

For the government, closing the credit gap is fundamental to meeting food-security goals. The Farmers’ Day theme and the scale of investment outlined in the budget highlight the urgency. “May this year’s celebration inspire renewed commitment, unity of purpose and innovation in advancing Ghana’s agricultural transformation,” the agriculture minister said.

The road ahead

Ghana’s farm-financing ecosystem is expanding more quickly than at any point in the past decade. The system of guarantees, subsidies, blended finance and long-tenor loans is becoming better aligned with the risks faced by producers. Yet questions about scale, sustainability and compliance remain.

Banks are slowly increasing exposure to the sector, though cautiously. Government is supplying inputs on a scale not seen in years. But for financing schemes to succeed, farmers will need stronger records, stable markets and greater resilience to climate shocks.

Whether these tools can close the long-standing credit gap will determine if Ghana’s ambition to “Feed Ghana, Eat Ghana, Secure the Future” becomes a reality or remains an aspiration repeated each year.

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