Scaling agriculture: Insights from Ghana’s input financing models

Challenges with input accessibility

For many smallholder farmers in Ghana, access to critical inputs such as seeds, fertilizers, pesticides, and equipment is a persistent challenge due to limited financial resources and high upfront costs. With their scarce resources, they often have to make a tradeoff between either farming a relatively larger surface and applying a minimum amount of fertilizer or farming a smaller surface with an adequate fertilizer application. This lack of access directly impacts productivity, resulting in low yields and perpetuating cycles of working capital deficits at the beginning of each planting season.

“A major challenge for us [farmers] is limited working capital, as many of us do not have cash at hand to acquire inputs.” – Aliyu Sisu Mohammed, a Mybarnes partner farm.

Input financing bridges this gap by providing smallholder farmers with necessary inputs on credit, ensuring timely access under terms that align with the agricultural cycle. In Ghana, some notable input financing companies include Complete Farmer, Degas, Farmerline, Saving Grains, Mybarnes, and Grow For Me. Additionally, large-scale agro-processing companies, such as Blue Skies, provide input financing to their network of smallholder farmers.

Commercial input financing companies primarily run two models:

1. Direct financing to farmers: This is the most common model of input financing, in which input financing companies supply farmers with necessary agricultural inputs such as seeds and fertilizer on credit. These companies customize the amount of supplies based on the farmer’s needs for each planting season, considering the crop type and farm size. Interest rates on these credit arrangements typically range from 5% to 25%, depending on the type of crop and cost of funds. Farmers usually repay the credit in kind with a portion of their harvest, with the repayment amount agreed at the time of receiving the inputs. Established commercial farms with existing off-take agreements may opt to repay in cash instead. To mitigate the risk of default when working with smallholder farmers, input financing companies often operate through cooperatives or farmer-based organizations.
2. Financial Institution (FI)-partnered financing model: This is a new model that has gained traction in recent years, where input vendor companies such as Complete Farmer and Mybarnes collaborate with banks, non-bank financial institutions (NBFIs), and third-party vendors to extend input credit to smallholder Under this structure, the partner bank or NBFI provides a short-term loan to the input vendor company to supply inputs to farmers at the start of the season.

At harvest, the input vendor offtakes the crops, deducts the costs of inputs, and pays the farmers the remaining amount. The input vendor sells the crops and channels the proceeds through the partner bank. The bank or NBFI deducts the loan principal and accrued interest (between 20% – 30%), before transferring the remaining balance to the input vendor company. In this model, the input vendor company guarantees the offtake of crops, while the NBFI either provides upfront payment or guarantees payment for the inputs.

Value added services beyond credit

Without input financing companies, smallholder farmers would struggle to afford agricultural inputs or obtain commercial credit for input purchases, due to limited funds, lack of credit history, and inability to provide the required collateral by financial institutions. Input financing provides such smallholder farmers with the opportunity to scale their operations without working capital constraints.

Many input financing companies bundle their services with technical assistance and capacity building, equipping farmers with knowledge on efficient input usage, pest management, and sustainable farming techniques. Further insights into how BRIDGE-in Agriculture builds these capabilities among agribusinesses can be found here.

This holistic approach ensures that farmers not only access inputs but also maximize their output potential. For instance, Complete Farmer provides training on input applications and assigns dedicated experts to farmers to monitor their farms. In addition to providing training on input applications, Grow For Me and Mybarnes facilitate ploughing and harrowing services through third-party providers.

“Grow For Me provided drones for spraying our farms against pests when our crops were heavily infested with armyworms.” – Rosemary Gyimah, a Grow For Me smallholder farmer partner in Nkwanta.

“Mybarnes provided us with knapsack sprayers at no extra cost.” – Aliyu Sisu Mohammed, a Mybarnes partner farmer in Ticheli.

Understanding the costs

A common criticism of input financing is the high interest rates and margins charged by providers. While these costs can appear high, they are often misunderstood. These charges do not only reflect the cost of capital, which input financing companies must source upfront, but also operational expenses required to effectively deliver financing at scale, including farm monitoring, risk mitigation, logistics and administrative overheads.

These charges are necessary for the financing companies to sustain their operations and ensure continued support for smallholder farmers, similar to microfinance institutions.

Farmer perspectives

It is essential to compare these costs to the benefits farmers receive. To gain firsthand insight, we engaged farmers working with Mybarnes, Saving Grains, and Grow For Me to evaluate the impact of these programs on their farming practices, yields, incomes, and overall livelihoods. Our research revealed that farmers who accessed input financing support experienced yield increases of up to 200%. For example, some maize farmers in the Eastern Region, who obtained high-quality seeds and fertilizers through Grow For Me’s financing program reported harvesting up to twice more produce compared to when using traditional methods. Overall, the additional income generated from using inputs often outweighs the financing costs, making it a worthwhile investment.

The perspective that input financing exploits farmers fails to consider the broader picture. While financing comes at a cost, the benefits outweigh these expenses. Increased productivity, higher income, and improved livelihoods are tangible outcomes that cannot be ignored.

In addition to credit and technical assistance, many input financing companies strengthen their support by providing market linkages as part of their offering. As previously mentioned, this enables farmers to not only improve productivity but also access better commercial opportunities. For example, Complete Farmer connects its farmers directly to export markets, guaranteeing a ready market for their produce and reducing post-harvest losses. This also allows farmers to earn up to 30% above local market prices.

Responsible input financing companies also prioritize fair pricing and transparent practices. They implement clear pricing models and ensure that farmers understand repayment terms, timelines, and interest rates. This approach builds trust and fosters long-term relationships between farmers and financing providers. The smallholder farmers we engaged expressed satisfaction with their financing partners and confirmed their intent to continue the partnership. Many plan to expand their farms and expressed willingness to recommend these services to other farmers.

“I will recommend the input financing to other farmers because a lot of farmers have the potential to expand but cannot afford the inputs.” -Aliyu Sisu Mohammed, a Mybarnes partner farmer in Ticheli.

Contrary to the misconception that input financing traps farmers in a compounding debt burden, the ultimate credit risk in most cases is borne by the input financing company themselves. For example, Complete Farmer rolls over unpaid credit into the next production season and continues supplying inputs. In cases where uncontrollable factors, such as adverse weather conditions, make repayment impossible, Complete Farmer absorbs the loss and writes off the debt at the end of the year.

It is worth noting that different farmers have unique requirements, and input financing models need to be tailored accordingly. A small-holder rice farmer might require a different package compared to a red chilli farmer.

By customizing their offerings, input financing companies can address specific challenges and maximize their impact.

Understanding the market of each crop is also crucial. Profit margins can vary, as such financing terms, including interest rates, need to align with the crop’s financial viability to ensure affordability and sustainability.

Key challenges

Despite their growing impact, input financing companies face challenges. Limited access to capital and the absence of agricultural insurance for unpredictable weather conditions (such as droughts and floods caused by climate change) continue to impede their growth. According to Complete Farmer, financial institutions remain hesitant to extend loans to input financing companies due to the perceived risks associated with agriculture, despite these companies demonstrating a strong track record in risk mitigation.

Collaboration is key

Agricultural input financing is not a burden; it provides a lifeline for many smallholder farmers in Ghana. Addressing accessibility challenges and enabling farmers to scale their operations play a vital role in improving the incomes and lives of smallholder farmers and strengthening food security.

While costs are a reality, they are outweighed by the long-term value and opportunity these services provide.

Stakeholders, including investors, development organizations, and private sector players, must continue to support and refine input financing initiatives. Ensuring that these programs remain impactful and sustainable requires collaboration, innovation, and a commitment to empowering smallholder farmers. By doing so, we can highlight the transformative potential of input financing and create a thriving agricultural sector that benefits all.

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