In the heart of Assin Breku in Ghana, amidst the towering oil palms and lush greenery, a quiet financial revolution has been taking place.
Smallholder oil palm farmers like David Amoamah have, for the first time, been able to access loans from a financial institution to improve their production.
The 75-year-old vividly recalls the constraints farmers faced, particularly the need for skilled labor and the reluctance of banks to provide loans for farm upgrades and maintenance.
David, who had felt the lack of financial resources as a weight pressing down upon his dream to expand his farm and enhance his productivity, now says, “I never thought I would see a breakthrough in accessing financial support for our farming activities.”
“Before the intervention, we relied solely on the young people in the neighborhood to provide farm services such as weeding, pruning and harvesting. Not only was this costly but also undependable”, David shared.
A PILOT PROJECT THAT WORKS
The Satellite for Business programme piloted between 2019 and 2022, sought to enhance smallholder farmers’ access to finance and farm labor. The programme collaborated with the Assin Oil Palm Farmers Association, Greenage Limited (a farm service provider), Advance Savings and Loans and Assin Oil Mills, a processing mill and buyer of fresh fruit bunches (FFB) to design a loan facility designed specifically for farm maintenance and improvement.
Facilitated by Solidaridad through the Satellite for Business programme, the loans were disbursed through Advance Savings and Loans with repayment structured over ten months in a way that aligned with the harvest season.
Satelligence, an implementing partner on the project, contributed to planning for service delivery and disbursement of credit to farmers. Satelligence used satellite data to develop a map that would effectively connect participating farms to the service provider, the financial institution, and the fresh fruit bunches buyer.
The repayment amounts were designated monthly and based on the expected harvest volumes that were adjusted for peak and lean seasons. Not more than 50% of the farmer’s harvest income was allocated towards loan repayment each month, ensuring continued access to funds for his or her livelihood needs.
Under the financing arrangement, a credit scoring tool developed by an implementing partner, Financial Access, was used to gather information about farmers and their farms which determined the farmers’ creditworthiness.
Based on the scoring, farmers were selected to benefit from the loan facility. Farmers submitted farm service requests to Greenage Limited, who upon completion of a service, provides invoices to be settled from the loan sum, a process repeated until the loan is exhausted.
Due to the size of his five-acre farm, David received the amount of 5,760 Ghana cedis (480 euros) for farm maintenance services in 2023.
He hails the programme as a timely intervention which addressed the service challenges that previously had held back his farm’s productivity.
Previously, David harvested around 11.94 metric tonnes of fresh fruit bunches annually, but thanks to the infusion of funds and the enhanced farm service provision, David anticipates a minimum yield of 25 metric tonnes for 2024.
“The improved farm maintenance culture has significantly boosted my farm’s productivity.”
David Amoamah
FARMERS FIND AN INNOVATIVE LIFELINE
Richmond Kusi, Field Supervisor at Greenage Limited, says the programme has served as a lifeline for farmers and even had a significant impact on the personnel at Greenage. “With the influx of loans and the heightened demand for farm maintenance services, Greenage has expanded its workforce and invested in mechanized tools to improve our efficiency. What was once a team of 24 individuals has now grown to 53.”
As part of the programme, a strategy was developed to prevent farmers from misappropriating or misapplying loans. Under the plan and as part of the loan agreement, farmers agreed to supply their fresh fruit bunches (FFBs) to Assin Oil Mills. Assin Oil Mills, in turn, ensured competitive market prices for the FFBs received.
Richmond Kusi lauds the payment mechanisms instituted by the programme. “Previously, farmers engaging Greenage’s services on credit occasionally diverted funds into other ventures upon receiving payment for their harvest. However, under the programme’s guidance, such occurrences have diminished,” he says.
Commenting on the immediate impact of the programme on Assin Oil Mills’ production, James Amoako, the mill’s managing director, noted a significant increase in raw material inflows to the mill.
“The increase in farmers yields, as a result of the loan, has led to an increase in the inflow of raw materials, which has consequently boosted our production,” James reveals.
A total of 47 farmers, including seven women, secured loans from the financial institutions.
A PILOT PROGRAMME SETS THE STAGE FOR THE FUTURE
The Satellite for Business was funded by Geodata For Agriculture And Water, the Netherlands Space Office and the Ministry of Foreign Affairs of the Netherlands and implemented by Solidaridad, Financial Access, ESOKO, Satelligence and Akvo.
This ground-breaking initiative of securing a loan facility from a financial institution for smallholder oil palm farmers is unprecedented in the sector, says Alfred Fosu, programme manager for the project.
He says that, “By employing innovative mechanisms, these 47 farmers were effectively de-risked through credit scoring, making them creditworthy for financial engagement. This strategic investment not only enhances productivity but also secures the future of the farmers.”
“Through advanced credit scoring and strategic partnerships, we ensure every farmer has access to financing, transforming aspirations into reality and fostering sustainable growth for smallholder farmers and small and medium enterprises alike”, he adds.
With financing from the Satellite for Business programme, smallholder oil palm farmers like David Amoamah continue to reap the rewards from their investment in farm upgrades. It is a small step forward on the path towards a sustainable agriculture future.