Financing for Agricultural Processor Establishes Ready Market for Outgrowers
USAID-FinGAP advisor facilitates access to financing for SAVBAN to expand reach to 6,000 smallholder farmers
For 40 years, Ayishetu Fuseini farmed rice at a subsistence level in the Tamale district, in the northern part of Ghana. After every harvest, Fuseini carried her produce to the market to look for a buyer, hoping to find one and return for payment the next day, rather than continue her search or be forced to sell at a low price. Like thousands of smallholder farmers in Northern Ghana, Fuseini never had assurance there would be a market for her produce.
SAVBAN Processing and Marketing Company has served as a key link between Ghana’s rice and soybean farmers in the north and processors in the south for the past four years. Yet lack of financing has prevented SAVBAN from expanding its business to meet the growing demand for its products and support farmers like Fuseini. SAVBAN’s mill had the potential to produce 10-metric tonnes of rice per day, but the company faced low productivity, poor quality paddy input, and inconsistent supply from its rice outgrowers. Meanwhile, SAVBAN had been unable to scale up its soybeans operation due to limited working capital. With financing, SAVBAN could grow its soybeans operation, expanding its geography to reach many more than the 4,000 smallholder farmers in the Upper East, Upper West and Northern regions under its scheme and double the 2,500 metric tonnes aggregated annually.
USAID Financing Ghanaian Agriculture Project (USAID-FinGAP) has been working to improve financing and investment in agribusinesses operating in the maize, soy, and rice value chains in the north of Ghana. During USAID-FinGAP’s annual Agribusiness Investment Summit held in Accra, Tradeline Consult, a business advisory services (BAS) provider in the USAID-FinGAP network, read about SAVBAN’s market opportunity in the investment opportunities booklet circulated at the event and developed a working relationship with the company to help them access financing.
Tradeline assisted SAVBAN in preparing a business plan, a financial and investment plan, and a loan application for financing, resulting in two successful funding sources. In 2014, Ecobank Ghana Limited released a working capital loan of $131,579 to SAVBAN to buy more soybeans from its outgrowers, providing the farmers with a ready, reliable market for their produce and increased earnings of about 20%. Ready markets give farmers stable agreed prices that are higher than what they can get at the open markets. After successful repayment, Ecobank disbursed a second loan of $300,000 to support outgrowers and increase volume of soybeans aggregated during the 2015-16 cropping season.
“The financing received has helped us to address our liquidity challenges and increased volumes of aggregation and income,”
– Joshua Toatoba, Operations Manager of SAVBAN
With the additional round of Ecobank financing, SAVBAN aggregated an additional 1,950 metric tonnes of soybeans from a total of 6,000 smallholder farmers (of which 53% are women) in Northern Ghana. SAVBAN’s product was sold to small to medium including large enterprises (SMiLEs) based in Sunyani and Techiman in the Brong Ahafo Region and Tema in the Greater Accra Region for processing.
SAVBAN’s second source of funding was a EUR 200,000 ($225,940) grant from the German International Development Cooperation (GIZ) to support rice aggregation and processing. To ensure the consistency and quality of rice and soybeans supplied, Tradeline Consult helped SAVBAN develop contracts between the company and its outgrowers, committing the farmers to supply a specific quantity, variety, and quality of produce. The grant from GIZ also enabled SAVBAN to provide training in good agronomic practices to its outgrowers and increase the quantity and quality of paddy aggregated and milled for sale to institutional buyers and urban consumers. The increased productivity of rice outgrowers would meet SAVBAN’s annual paddy demands and build capacity to deliver product that meets national rice quality standards and ensure that SAVBAN’s operations are sustainably profitable.
“The support from SAVBAN has enabled us to increase production and improve quality. We have also gained access to ready market which has helped us to increase our income and profits.”
– Bintu Alhassan, member of the Tuutingli Outgrower Group
The financing has created a secure market for smallholder farmers in the three northern regions, resulting in increased production for higher incomes and improved food security. Direct purchases from SAVBAN assures farmers of sales and guaranteed income and encourages them to increase production because they are confident they can sell more goods at the right price and earn more money, as well as have enough produce for household consumption.
With the assurance of a market for her produce, Fuseini has joined an outgrower group that produces rice for SAVBAN in commercial quantities. “I used to carry my own produce to the market to go and look for a buyer and pick up my money on the next market day,” Fuseini said. “But this year, SAVBAN has come into my compound to purchase my rice, they paid me a good price, and I received my money on the spot.”
USAID-FinGAP’s introduction of its BAS providers to agribusiness opportunities is creating a sustainable chain of actors in the region. The successes chalked up with the financing facilitated for SAVBAN has led Tradeline Consult, originally based in Accra, to set up an office in Tamale, Northern Region, to grow its own business. There the business advisory services provider will work closely with other SMiLEs in Northern Ghana seeking financing to expand their capacities. Tradeline Consult plans to eventually set up offices across all ten regions of Ghana to help improve the agribusinesses and increase food security in the country.
“We believe there is a huge potential in the agribusiness sector in Northern Ghana,” Sam Zeph Atiemo, Chief Executive Officer of Tradeline Consult, said. “With the right investment systems and structures, many businesses would enjoy sustainable profitability. This would go a long way to increase job opportunities and improve livelihoods.”