Creative agriculture financing schemes for sustainable agriculture and food security

Creative agriculture financing schemes for sustainable agriculture and food security

While nations strive to attain self-sufficiency in agriculture, food insecurity is becoming widespread at an alarming rate owing to low crop and animal yields (productivity). Low productivity in the Agric sector is due to limited investment and financing support for agriculture, among others. 


The vast demand for investment in the agriculture sector requires a corresponding supply of financing to support productivity and address food insecurity. 

At the current global population growth rate (averagely at 1%), it is estimated that food production must increase by 70% to catch up with the demand of the over 9 billion global population by 2050. 

To make this happen, the global agricultural sector would require US$80 billion in investments annually according to the World Bank.

Food demand in Africa is also expected to grow rapidly in lockstep with the population, with the total size of the African agriculture market projected to reach US$1 trillion by 2030.

Globally, per the Integrated food security Phase Classification (IPC) about 48 countries with approximately 238 million people suffered acute hunger in mid-year 2023. This represents a 10% increase in the number of hungry people in 2022 – an additional 21.6 million.

The prevailing food insecurity worldwide can be attributed to insufficient investments across the agriculture value chain to boost agriculture productivity.

These trends highlight the need for more investments and financing to combat food insecurity. Africa is blessed with vast arable land.

The region accounts for about 25% of the world’s undeveloped fertile lands. Despite the huge stock of fertile lands, food insecurity has worsened in the past five years.

The rate of food insecurity increased from 19% in 2018 to 24% in 2022, above the global average of 11.3%, which dropped between 2021 and 2022 after increasing from 9% in 2018 to 11.7% in 2021.

Output from farmlands has been below its potential due to low financing support for the agriculture sector; further deepening the prevailing food insecurity issues in vulnerable times.

Recent unexpected economic shocks have threatened food supplies for most vulnerable African countries post- Covid and 15 million more people were pushed into poverty as of 2022.

Consequently, projections are that the number of Africans at risk of hunger could potentially rise from 270 million to about 310.7 million by 2030.

These trends signal of rising food insecurity since 2014 at 16.7% surging to 24% as of 2022 and likely to exceed 25% soon based on current hikes in food prices as it worsens if not urgently addressed.

Agriculture contributes on average 20% of total GDP in Africa and about 14% of sub-Saharan Africa’s GDP. Valued at US$330 billion as of 2019, agriculture remains the biggest employer in the Region responsible for about 65% of Africa’s employed labor force. 

Typically, cash crops such as cocoa, coffee, tobacco, fruit, and cotton are significant sources of foreign exchange for many countries on the continent.

Despite the significant role of agriculture and the benefits accruing from the sector, it remains grossly underfinanced in areas such as mechanization and storage capacities across the region. If given the needed attention, the agricultural sector has the potential to transform the African economy.

On average, less than 7% of total commercial bank lending was disbursed to the agriculture sector in Africa in 2018. In the past decade, West Africa has benefited the least from agriculture-related financing in the region, receiving only 18% of the total number of deals whereas Southern Africa and East Africa received 28% and 44% respectively. 

As nations strive to maximize production to meet the demands of the growing population in Africa, they struggle with poor irrigation, use of manual labor due to lack of mechanised equipment and unskilled labor; which can all be solved using creative agricultural financing schemes.

Ghana witnessed slight improvements in productivity in the initial stage (Phase 1) of the Planting for food and Jobs Initiative and other government intervention programs. However, the country saw an unprecedented rise in food prices from 2022 evidenced by the national food price index which increased by 23.8% in 2022, this widens the country’s exposure to food security risks. 


The country ranked 83rd amongst food secure countries in the world according to Global Food Security Index- 2022 report with a score of 52.6%. In the wake of the of climate change, the country’s food security is at risk.

Ghana is one of the top 10 countries impacted severely by climate change despite contributing the least to global warming. 

Food production has been abysmal and to reverse this trajectory, access to sustainable financing is needed to improve productivity and scale up production to support the rest of the region.

In the last five years, on average only 4.0% of total bank lending in Ghana went into agriculture. The constrained access to funds from most banks can be traced to the perceived risks of poor record keeping practices which affect assessment of farmers’ creditworthiness, extreme low level of agriculture mechanization coupled with post-harvest losses. 


The outturn of these risks can be seen in the sector’s deficient performance and high credit defaults.

Non-performing loans for the sector averaged 30% over the last 5 years relative to the 17% averaged by the banking industry across all sectors, evidencing banks’ hesitation to fund the agriculture sector. 

Ghana’s agriculture economy is valued at about US$12.6 billion. The sector contributed an average of 20% to GDP in the last Five years. 

Cash crops and other commodity exports from agriculture account for 20-25% of total export revenues for the nation. The sector is also responsible for employing over 35% of the total employed labor force. Agriculture however remains rainfed and on a subsistence basis with only 15% of farms in Ghana commercialized. 


Low mechanization, poor farm recordkeeping, inadequate storage & processing capacities, poor rural transportation infrastructure and post- harvest losses are the core challenges affecting agriculture sector performance and disincentivizing financing for the sector.

Typically, agriculture portfolios are thin for all financier groups. Considering the existing funding gaps, more interventions are expected from funds and financial institutions especially the Agriculture Development Bank and Ghana EXIM Bank whose core mandates include providing funding to actors in the agriculture value chain.

Until the funding gaps are fully plugged, food insecurity remains a threat to the nation.

It has been identified that pre- harvest financing is a big gap in agriculture as evidenced by low quality inputs. Poor mechanization in agriculture remains a significant challenge in Ghana hindering productivity for food security.

To create a sustainable financing regime for the sector, stakeholders can establish more leasing and rental programs that allow farmers to access machinery and equipment without the upfront costs of ownership.

This financing model spreads the financial burden over time, making mechanization more accessible to small hold farmers.

Agriculture financing schemes such as equipment- sharing cooperatives where multiple farmers pool resources to purchase machinery collectively should be encouraged. This approach allows farmers to share the costs of ownership and maintenance while enhancing productivity.

The pay-per-use or pay-as-you-go financing initiative (under the Agriculture Mechanization Service Centers - AMSEC Program) in the country is notable and must be expanded.

This should be facilitated through digital platforms or mobile apps which enable farmers to pay for mechanization services on a per-acre or per-hour basis, making it cost-effective for the average farmer while bridging the financing gap in agriculture.

Tying financing to the use of machinery as a lending condition would allow financing to be provided based on expected increase in yield or income resulting from mechanization.

Agricultural equipment hubs that provide access to a variety of farm machinery and equipment is another financing option to consider.

Banks and agriculture agencies can offer financing options in the form of technical support, and training to small scale farmers. The aim is to bridge mechanization gaps to boost productivity to assure food security.

The recurring inefficiencies in the farming sector are partly attributable to poor farm record-keeping and other practices which have led to many missed financing opportunities and low productivity in agriculture.

Government or agriculture development agencies should implement farm-record-keeping subsidies or matching grants to farmers who invest in proper record keeping tools. This can offset the initial cost of adoption.

Incentivising the farmers who maintain accurate farm records with insurance premium discounts to improve record keeping should also be explored. This would make the agriculture industry more attractive for commercial loans. 

To provide credit to smallholder farmers while addressing key sector challenges, financial institutions can tie credit to proper record keeping practices under an “Access-to-Credit” innovative financing scheme.

This will position farmers who keep accurate farm performance data to qualify for low-interest credit or higher credit limits.

Post-harvest losses are key bottlenecks to food security in Ghana and a critical aspect of the agriculture sector that calls for massive investments.

This has cost a sizable number of farmers income and prevented them from accessing well-structured and priced financing.

Crop receipts implemented in Zambia and Uganda is an innovative financing scheme Ghana can explore to enable smallholder farmers mobilize funding from the financial market while inviting new entrants, including the capital market.

Crop receipts serve as collateral for loans. Farmers are handed receipts upon storing harvests in warehouses. 

These receipts serve as proof of ownership which can be used to secure loans for other farming activities. Additionally, impact investors can provide patient capital to agriculture startups and enterprises focused on developing and scaling solutions for post- harvest losses. 

These investments often come with technical support and mentorship with the aim of expanding financing support to increase production.

A credit line for investment in post-harvest technologies is a direct way to provide funding for agriculture as a step-by- step value chain financing solution for agriculture. These technologies can help extend the shelf life of produce to ensure food security.

Beyond private sector participation, Government has a key role to play in agriculture productivity. Government’s flagship programs such as Planting for Food and Jobs and other subsidy programs are notable. 

However, until agriculture is aligned to high-end technologies and increasing public investment in agriculture R&D, Ghana cannot be compared to top food secure countries like the Netherlands, Finland, Ireland, Japan, and others in world.

Ghana could be thrice more productive in agriculture if it replicates the creative financing models as used in the agricultural sectors of the countries mentioned above.

Continuously neglecting the financing needs of the agriculture sector will only frustrate efforts towards growth and deprive the sector of realizing its full potential.

Ghana’s agriculture sector is promising and to revive its weak financing regime these innovative financing schemes must be implemented.

Government, banks, and all stakeholders must embrace efforts towards agriculture financing to improve productivity in view of achieving national food security.

The writer is an Analyst and sector specialist in charge of C-NERGY's Health, Agriculture and Agribusiness desks.

Connect With Us : 0242202447 | 0551484843 | 0266361755 | 059 199 7513 |

Like what you see?

Hit the buttons below to follow us, you won't regret it...