Access to finance for smallholder farmers in Ghana is full of challenges. High interest rates (average 33%), demand for collateral by banks, inconvenient loan application processes, and perceived high risk of the sector are some of the challenges resulting in low financial support to farmers and other agri-entrepreneurs. Of the total loans issued by the financial sector, only 3.9% goes to the agriculture. This has resulted in limited investment and often leads to inefficiencies in the value chains and threaten their sustainability as well.
To address the issue of women’s access to credit, 2SCALE piloted the Village Savings and Loans Association (VSLA) in 4 selected communities in the Banda Borae cluster in 2016, involving 80 women. With these VSLAs, the women met weekly to contribute through the purchase of shares by each member. After a period of contributions, opportunity is opened for borrowing from the accumulated savings, which is paid back based on agreed (favourable) terms. The money is later shared out based on individual contributions after a period of time (9 months for the first cycle, and 12 months for subsequent cycles). This pilot was successful and triggered the need for replication in other clusters. In 2017, an additional 16 VSLA groups (320 women) were formed.
After two years of implementing the concept, access
to finance has improved tremendously for the women. Some have invested in
inputs and other services, while others have expanded their farms.
Opportunities have also been created for the women to engage in other income
generating activities as an alternative source of livelihood. They now have a
reliable and affordable source of borrowing, on terms that meet their peculiar
needs, and also benefit from the interest they pay on the loans during share
out (at the end of the cycle). So far, a total credit of GHS101,440 has been
disbursed through the VSLAs. New groups are being formed without the active
participation/funding of 2SCALE. It is foreseen that the VSLAs will in future
be linked to the rural banks/credit unions to explore investment opportunities or
save their funds (when there is excess money in the box).
To know more about this project, check the following video: