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Innovative value chain approaches that work for smallholders in Ghana

Posted by Steven Jonckheere Thursday, March 3, 2016

IFAD | D. Paqui
There are three major poverty divides in Ghana: rural-urban, north-south, and between women and men. To meet these challenges, IFAD, the African Development Bank and the Government of Ghana are investing in rural northern Ghana to create viable economic opportunities – particularly for women – while improving market linkages with the south and neighbouring countries. The Northern Rural Growth Programme (NRGP) is spurring agricultural and rural growth and poverty reduction with innovative approaches like District Value Chain Committees (DVCCs). NRGP’s experiences were shared during a parallel session of IFAD’s 39th Governing Council.

The District Value Chain Committee

IFAD | D. Paqui
IFAD-supported NRGP worked in partnership, for example, with the Association of Church Based Development (ACDEP), a local NGO in northern Ghana to establish the DVCCs. Today, DVCCs are a forum for all local actors in the value chain and was designed to ensure that smallholder farmers can secure access to credit and other inputs, and markets (end-buyers). They are responsible for the effective planning, implementation, coordination and monitoring of activities in the maize, soya and sorghum value chains. All value chain actors are represented on the DVCC: farmers’ organisations (including women producers), input dealers, tractor service providers, local aggregators/buyers/off-takers, the Ministry of Food and Agriculture (District Development Unit), Department of Cooperatives and participating banks from the RCB network. The DVCC’s Executive Committee has nine elected members who perform their duties on a voluntary basis, and four non-voting members representing the Ministry, the District Development Unit, the Department of Cooperatives, and the RCB network. The Executive Committee manages all DVCC activities, producing annual crop enterprise budgets, reviewing all production loans and endorsing loan applications, and selecting input dealers and tractor service providers under the cashless credit scheme. The DVCC is also the forum for price negotiations with aggregators.

The cashless credit system

IFAD | D. Paqui
The programme uses a financing model that overcomes the problem of smallholder farmers’ limited access to inputs and services. Local rural and community banks (RCBs), owned and governed by rural communities, are at the heart of this model. The DVCC screens farmers’ organisations that want to participate in the programme and, with technical advice from the Ministry of Food and Agriculture, develops annual crop budgets on an acreage basis that form the basis for production loans. The DVCC also determines prices of inputs and services, enabling it to specify how much credit each smallholder farmer can access. On receiving an application for credit from a farmers’ organisation, each bank conducts its own due diligence using the Know Your Client (KYC) mechanism developed by NRGP. If the applicant meets the bank’s requirements, the loan is approved. While the application for the loan is made by the farmers’ organisation, its individual members receive the credit in the form of services and inputs from named service providers or input dealers. When these inputs or services have been provided, the farmers’ organisation issues a voucher to the service provider or input dealer, who presents this to the bank for payment. The loans are then repaid when farmers’ organisations sell their produce either directly, through aggregators, or in some cases by the farmers’ organisation itself if it has sold produce on spot markets.
IFAD | D. Paqui

The Ghana Agriculture Sector Investment Programme

A new programme, the Ghana Agriculture Sector Investment Programme, is currently building on the experience of NRGP with district value chain committees and the cashless credit system and bringing them to scale at national level.