Chapter 6. The role of the private sector and the engagement of smallholder farmers in food value chains 207
- Other public-private initiatives for engagement with
smallholder farmers in Ghana
5.1 The Outgrower and Value Chain Fund (OVCF) for agricultural financing
Agricultural development in much of Africa is hindered by a lack of accessible finance. The traditional
channels for access to capital and finance rarely work in agricultural sectors, especially for staple products,
and innovative approaches are sorely needed. A recent initiative in Ghana – the Outgrower and Value
Chain Fund (OVCF) – was started with German cooperative support. Its objective was to improve access
to medium- and long-term financing of investments by small-scale farmers as part of outgrower schemes,
thus facilitating the integration of smallholder farmers into commercial agriculture.
The OVCF facility brought together the outgrower/farmer, the technical operator (processor, exporter
or aggregator) and the financial operator/participating bank to collaborate in development of the
agricultural value chain. The project was initiated as one method to support implementation of the
Government of Ghana’s agricultural policy instruments, such as METASIP, FASDEP, and the Ghana
Shared Growth and Development Agenda.
Factors contributing to the success of the project include the tripartite contract arrangement, the
provision of quality technical and financial services, access to information, and transparent pricing
and knowledge of value chain financing by participating banks. Participation in the program is subject
to specific eligibility criteria for each of the three main categories of stakeholders. To ensure long-term
sustainability of the program, technical assistance, training and organizational development support
for the three main categories of stakeholders (outgrower, technical operator and financial operator)
are critical. Good governance (through establishment of a steering committee to engage with all
stakeholders) is critical, as well. Success also hinges on resolving such challenges as agreeing on
appropriate and reasonable interest rates for both the outgrowers and the financial institutions, and
implementing innovative approaches to risk management. Implementation of the project required
intensive preparation. The OVCF initiative became operational in April 2011 and the disbursement of
funds was expected to start in the third quarter of 2012.
5.2 Commodity chain development and facilitating access to finance:
Northern Rural Growth Program (NRGP)
The Northern Rural Growth Program (NRGP) is managed by the Ghanaian Ministry of Food and
Agriculture with funding from IFAD and the AfDB. NRGP is a private sector-led agricultural development
and investment strategy for poverty reduction that seeks to facilitate smallholder farmers’ access to
finance. The program focuses on northern Ghana, a region facing multiple constraints, including
weak market linkages, high transport costs, poorly motivated producer organizations, inadequate
infrastructure and weak financial services. The program was designed to address the constraints of
agricultural production and the productivity value chain in four commodity groups: (i) industrial crops
(soybean, maize, groundnut, sorghum); (ii) export fruits and vegetables (papaya, okra, chili); (iii) crops
grown especially by women (shea, sesame, moringa, African brown rice); and (iv) animals (Guinea
fowl, small ruminants).