Ghana: Inventory Credit for Small-Scale Farmers

This paper discusses the "Ghana Inventory Credit Project" that aimed to provide small-scale farmers with the opportunity to take advantage of seasonal price swings. The paper lists the following:Features of the project:

• Formation of farmers' groups to store produce;
• Operation of the warehouse by a technical assistance provider;
• Provision of credit by a lending institution, based on the warehouse receipt;
• Grading of goods;
• Group loans;
• Group responsibility for treatment, storage and sale of goods.

Benefits and impact of the project:

• Promotion by the government of large-scale commercial inventory credit;
• Reduction in inter-seasonal price fluctuation;
• Benefit to small-scale farmers with no choice but to sell immediately after harvest;
• Marketing and credit options for farmers that spur productivity and increase incomes;
• Gain to financial institutions from increased liquidity and decreased risks;
• Advantage to farmers from increased profitability, price transparency and enhanced negotiating ability.

The lessons learned about inventory credit programs:

• Brings immediate benefit to small farmer groups;
• Contributes to the increased efficiency of agricultural markets;
• Is profitable only when the increase in the value of stored goods exceeds the cost of storage and borrowed funds;
• Is good as a temporary intervention, where markets are weakly developed;
• Sustainability depends on increased warehouse volumes, reduced unit costs and increased system efficiency.