Northern Farmers See Gains from One-Two Financing Punch
Strategic use of two investment traunches brings sustainable improvement in rice production
Mabel-Ann Akoto-Kwudzo is the Chief Executive Officer of Okata Farms and Food Processing Ltd., an agricultural enterprise that has been producing, processing, and marketing maize, rice, soy, and other crops since 2005. Based in the southern Volta Region of Ghana, near Accra, Akoto-Kwudzo recognized the opportunity to expand her operations further north, into the fertile wetlands towards Tamale in the Northern Region. However, lack of support for her smallholder farmers due to inaccessible credit and prohibitive interest rates limited how successful her expansion endeavour could be.
Following an introduction to the USAID Financing Ghanaian Agriculture Project (USAID-FinGAP), Okata Farms was one of XX agribusinesses that participated in the project’s Agribusiness Investment Summit held in the spring of 2015. The purpose of the Summit was to bring together agribusinesses, financial institutions, and business advisory (BAS) services providers to facilitate financing and investment along the maize, soy, and rice value chains in northern Ghana. There, Okata Farms connected with two BAS providers within the USAID-FinGAP network. Each of these partners linked Okata Farms to financing opportunities focused on separate areas along the rice value chain, reducing risks associated with farming investment and stabilizing the region for growth.
“USAID-FinGAP has offered us many opportunities and timely advice through its BAS providers. Replication of the Okata Farms model in the nine regions of Ghana will ensure food security and help transform agriculture for economic growth and sustainable national development.”
– Akoto-Kwudzo, CEO Okata Farms and winner of the 2015 Best Agro Processor Award
Okata Farm’s first round of advice came from BAS provider TMI Consulting. TMI assisted Okata Farms with accessing financing from the GIZ Competitive African Rice Initiative (CARI), a program to empower small-scale rice farmers in Sub-Saharan Africa. Together with CARI, Okata Farms initiated a matching grant fund project with the goal of integrating 3000 rice farmers into sustainable and competitive business models that lead to increased and improved paddy production. As a result of this program, farmers’ yields and incomes are expected to double by the end of the two-year project. Support is given to the beneficiaries through training in Good Agricultural Practices (GAP) and Post-Harvest Technologies. The technical packages and GAP training includes demonstrations of the use of the right inputs (fertilizers and agrochemicals) and good farming practices. Farmer Business School training increases farmers’ financial literacy and teaches them how to manage their farm as a business.
All this training, though, could only take Okata Farm’s outgrowers so far. Investment was also required for working capital and agro inputs. Okata Farms partnered with a second BAS provider, Business Finance Consultants Ghana Ltd., and Success 4 People Microfinance Ltd, a participating USAID-FinGAP financial institution. Business Finance Consultants helped prepare a quality loan application and supporting business plan. The result was an approved six-year loan at 12% annual interest, a much more appetizing and achievable rate than the industry standard of 30-36%. These funds enabled smallholder farmers to access mechanization services, certified seeds, and agrochemicals on credit for the 2015-16 planting season. The financing will also be used to train agriculture extension, monitoring and evaluation officers, and purchase tractors and harvesters.
Both rounds of financing resulted in a 70% increase in the quantity of rice produced and sold to Okata Farms since its market expansion two years earlier, before accessing investment funds. Over 1,800 outgrowers, including 875 women and 571 youth, in the northern districts produced and sold a total of 600,000 tons of rice to Okata Farms.
“The credit sale of inputs has helped us to increase production and earn more income to improve the living conditions of our families. We are now more food secure, and the interest of the youth in agriculture is heightened following the training in good agricultural practices.”
– Moses Quarshie, a 26 year old out-grower who has been working with Okata for two years
Prior to Okata Farm’s expansion into the northern part of Ghana, residents of the district’s communities relied mainly on the cultivation of yam and groundnuts for their livelihood. After planting, women and youth were idle until the harvest season when they provided labour on family farms and on the few commercial farms for income. Now, the youth are earning additional income for rice cultivation, fertilizer application, and reeiving farmer training. The women earn more as well, providing labour for harvesting, threshing and bagging of rice.
“Okata Farms has provided us with employment and income.” Gloria Dodzi Smith, a Community Youth Leader said. “Most of the youth are paying their school fees from the income earned while others are saving to further their education. Mud houses in the community have been rebuilt with concrete blocks and thatch roofs replaced with coloured roofing sheets.”
“Agriculture financing, particularly, lending to smallholder farmers is perceived as very risky,” Victoria Antwi, Managing Director of Success for People, said. “Using the USAID-FinGAP value chain financing approach helps to mitigate the risk.”