- Charles Nyaaba Warns Rigid Bank Rules Are Keeping Small Farmers Away from Credit
Ghana’s smallholder farmers are being pushed to the margins of the formal financial system by collateral and documentation requirements that often bear little relationship to the scale or economics of their businesses, according to agricultural advocate Charles Nyaaba.
The former Director of the Peasant Farmers Association of Ghana said financing rules designed around conventional borrowers continue to make even relatively modest agricultural loans difficult to access.
Speaking at the Ecobank-JoyBusiness Financial Dialogue in Accra, he argued that access to finance remains one of the most persistent constraints across the agricultural value chain.
“One of the major constraints when we come to assessing financing for whatever activities, from production to market to the consumer, has to be the availability of documents that financial institutions are expecting to get from the farmer,” Dr Nyaaba said.
His argument goes beyond the headline level of interest rates and focuses instead on what happens before a farmer is even considered eligible to borrow.
For many smallholders, the first barrier is not the cost of credit but the cost and complexity of proving that they qualify for it.
Dr Nyaaba illustrated the problem with his own experience of seeking finance to support farmers. He said a bank required him to transfer the title of a property before releasing the funds, with the transfer process alone costing about GH¢30,000.
“Last year, I had to provide everything to the banks. Now, I was told to take the document and go to the Lands Commission and transfer the title to the bank before they can give me the financing to the farmers,” he said.
For a commercial borrower seeking a large facility, such a requirement may be absorbed as part of transaction costs. For a smallholder farmer who needs working capital for seed, fertiliser, irrigation, labour or harvesting, however, a GH¢30,000 documentation cost can become prohibitive before the loan is even disbursed.
Dr Nyaaba questioned how a farmer relying on inherited family property could realistically meet that burden simply to secure agricultural credit.
“Where would that farmer go, even if the farmer has a house that he or she inherited from the family or from their parents?” he asked. “How can that farmer get GH¢30,000 to go and transfer the title of her parents’ house to be able to get that loan?”
The question exposes a structural mismatch between formal lending requirements and the asset profiles of many rural households, where land and property may be economically valuable but poorly documented or held through family and customary arrangements.
Ghana’s existing legal framework is broader than a land-title-only model and allows movable and immovable assets to be used as security.
The Bank of Ghana’s Collateral Registry recognises collateral including vehicles, inventory, receivables, machinery, livestock, crops, intellectual property, financial instruments, land and buildings, while the Borrowers and Lenders Act provides the framework for registering such security interests.
In theory, that should give lenders room to build credit structures around the realities of agriculture rather than depend exclusively on conventional property titles.
The challenge is converting that legal flexibility into actual lending practice. Agriculture carries risks that conventional credit models can struggle to price, including weather shocks, uncertain harvests, volatile commodity prices, irregular cash flows and difficulties enforcing claims against dispersed smallholders.
Banks therefore tend to compensate through collateral, documentation and pricing requirements, but the result can be a system that protects the lender so thoroughly that the intended borrower never gets through the door.
Alternative approaches are already being tested in Ghana. Fidelity Bank, for example, has argued for financing models based more heavily on production cycles, verified transactions, off-take agreements and warehouse receipts rather than conventional collateral alone, while partnerships with GIRSAL, the Mastercard Foundation and other institutions are being used to share risk.
The bank has said some agricultural facilities under such programmes are available at a total cost of 7.00% and can accept farmland as security, reflecting attempts to make credit structures better suited to agribusiness.
The International Finance Corporation has also moved to expand agricultural financing through partnerships with Absa Bank Ghana and Complete Farmer.
One arrangement is designed to support Licensed Buying Companies purchasing cocoa from more than 139,000 smallholders, while another includes a US$2.40mn convertible loan to Complete Farmer alongside US$660,000 in advisory and grant support to expand farmer financing, inputs and agronomy services.
These models reflect a growing recognition that financing agriculture may require lenders to work through value chains and established commercial relationships rather than assess farmers solely as isolated borrowers.
Dr Nyaaba is calling for that flexibility to become more mainstream. He wants financial institutions to differentiate among categories of farmers and reconsider collateral requirements, documentation demands, interest rates and repayment periods according to the economics of each borrower and farming activity.
A maize farmer with one production cycle, an irrigated vegetable producer with several harvests and a poultry operator with continuous cash flow should not necessarily be forced into the same financing template.
The issue has implications far beyond individual farmers. If agriculture is expected to reduce Ghana’s dependence on food imports, create jobs and supply raw materials for industry, then the sector requires working capital at a scale and on terms that match production cycles.
Credit that arrives after planting, requires documentation whose cost absorbs a significant share of the facility or demands collateral that most farmers cannot formalise may exist statistically without functioning economically.
There is also a risk that an inaccessible formal-credit market pushes farmers towards informal lenders and expensive short-term financing.
Such arrangements may be faster and require fewer documents, but they can leave producers with higher financing costs and weaker bargaining positions at harvest.
The result can be a cycle in which farmers remain small not because demand or productive capacity is absent, but because they cannot obtain capital on terms that allow them to scale.
That is why the farm-finance debate cannot be reduced simply to telling banks to lend more. Financial institutions need to protect depositors and manage default risk, while farmers need products that recognise crops, contracts, cash-flow histories, warehouse receipts and value-chain relationships as meaningful indicators of creditworthiness.
The policy challenge is to narrow the distance between those two realities without weakening prudent lending standards.
For Ghana, the central question is whether agricultural finance will continue to be designed around the assets farmers are assumed to possess or around the businesses they are actually running.
A credit system that demands GH¢30,000 in documentation before a farmer can access a modest facility may be technically secure for the lender, but economically inaccessible to the borrower.
If the country wants agriculture to become a larger engine of production and food security, the architecture of credit will have to become as practical as the farming economy it is supposed to finance.
