Solidaridad West Africa, an international non-governmental organisation (NGO) with expertise in building sustainable and inclusive commodity supply chains has organised a training workshop for staff of Pan African Savings and Loans (PASL), on risks, challenges and opportunities in financing smallholder farmers in the cocoa sector.

The workshop was to equip the staff of PASL with the skills and knowledge needed to properly assess the credit needs of smallholder cocoa farmers and to structure appropriate credit for them.

Addressing the participants, the Business Incubation Officer of Solidaridad, Mr. Kwadwo Boadi Mensah, said "financial institutions are reluctant to lend to smallholder farmers due to the risks associated with primary agriculture and the high transaction cost involved in lending credit to these farmers"

To reduce the cost associated with lending credit to smallholder farmers, Solidaridad West Africa and Pan African Savings and Loans, in collaboration with a cocoa farmers' cooperative, Kookoo Pa, co-created and piloted the Akuafo Loan, a loan product targeted at cocoa farmers who belong to village savings and loans associations.

“Village savings and loans associations provide smallholders with the opportunity to establish good savings and credit history, key factors for lenders when it comes to making credit decisions,” he said.

Mr. Mensah added that following the successful piloting of the Akuafo Loan between August 2018 till date, it has become necessary to equip staff of Pan African Savings and Loans with the skills needed for the scale-up phase.

He disclosed that Solidaridad intends to reach out to 50,000 cocoa farmers in the next five years and already, six more financial organisations have expressed the interest to join Pan African Savings and Loans to provide credit facility to the farmers.

He said the recovery rate has been very encouraging hovering around 98 percent during the peak season.

“The story so far has been very satisfactory, that is why we have a number of financial institutions now willing to adopt and roll out the Akuafo Loan to cocoa and oil palm farmers, ” he said.

The Head of Credit at PASL, Mr. Isaac Nuako said so far the partnership with Solidaridad has been very successful and as such the company has decided to extend the facility to a lot more farmers.

He said the partnership started in 2018 and the first disbursement was in August and as of February this year “we disbursed about GHC6.7 million to 3,375 farmers and the repayment has been very good so far. According to him, the objective is to extend credit facility to 10,000 farmers in the next two years.

Mr. Nuako admitted that most financial institutions were reluctant to lend to farmers as a result of the high risks involved as compared to other sectors. But added that ‘when PASL decided to go into the agriculture sector “we thought it wise to partner with people who have the understanding of farming activities.”