A quarter-century analysis of Bank of Ghana data reveals that Ghana's agriculture sector has consistently received a small share of commercial bank credit, ranging from 3% to 13%, with an average of 5.7%. This trend raises concerns about the sector's ability to access necessary funds, despite its significant contribution to the country's workforce and GDP. The sector employs a third of Ghana's workforce and generated 22.8% of the country's GDP by the close of 2025.
The agriculture sector's share of commercial bank loans decreased to 4.3% by the end of 2025 and further dropped to 3.1% by August 2026, despite banks having excess liquidity. Even the state-owned Agricultural Development Bank (ADB) allocated less than 30% of its loan book to farming. This limited access to credit hinders the sector's growth and development, as it struggles to compete with other sectors that receive more substantial funding.
The broader credit environment in Ghana has improved, with inflation dropping to 5.2% and the Bank of Ghana cutting its policy rate from 28% to 14%. Average commercial lending rates also decreased below 16%, leading to an increase in fresh credit to the economy. However, this wave of cheaper money primarily flowed into services, short-term commerce, and import trade, rather than agriculture.
The high default rate in agricultural loans, which reached 60.9%, is a significant factor in credit officers' reluctance to approve agricultural loan files. This default rate is attributed to the sector's unique challenges, such as limited irrigation, poor feeder roads, and insecure land titles. These factors make agricultural lending riskier and less attractive to banks, despite government efforts to clear arrears and reduce interest rates.
A comparison of two loan applications highlights the challenges faced by agricultural borrowers. An importer with a 90-day cash cycle and digitized shipping documents is considered less risky than a maize aggregator seeking five-year capital. The lack of effective risk-sharing tools, such as GIRSAL, which has guaranteed only around GH¢300 million per year, further limits access to credit for agricultural borrowers.
Finance Minister Dr. Cassiel Ato Forson is expected to present the 2027 Budget to Parliament on November 12, which may unveil a program aimed at addressing the sector's credit challenges. The program, described as a $9-10 billion initiative, aims to boost economic growth and development. However, the budget's success will depend on its ability to address the systemic issues limiting access to credit for the agriculture sector.
The 2027 Budget presentation will be closely watched, as stakeholders seek to determine whether the government will take concrete steps to address the agriculture sector's credit drought. With the sector's significant contribution to Ghana's economy and workforce, finding a solution to this issue is crucial for the country's economic growth and development.
Key points
- The agriculture sector's limited access to commercial bank credit, with a maximum share of 13% over the past 25 years, hinders its growth and development.
- The high default rate in agricultural loans, reaching 60.9%, is a significant factor in credit officers' reluctance to approve agricultural loan files.
- The 2027 Budget presentation may unveil a program aimed at addressing the sector's credit challenges, with a proposed $9-10 billion initiative.
