Ghana’s agriculture sector, touted as the backbone of the economy, is increasingly becoming a threat to the country’s financial sector, contributing disproportionately to the country’s rising non-performing loans (NPLs).
This was revealed by the Chief Economist at the Development Bank Ghana (DBG), Prof. Eric Osei-Assibey, at the Citi Business Forum held in Accra.
The economist reveals that in 2023, the agriculture sector accounted for a staggering 52% of all non-performing loans in Ghana, a figure that, although reduced to 38% in 2024, remains worryingly high.
In his assessment of the situation, Prof. Osei Assibey lamented that this threatens the flow of credit to the sector, has sparked urgent calls for systemic derisking interventions.
The economist bemoaned that despite efforts to derisk the sector, agriculture in Ghana remains a high risky venture and hence threatens the sustainability of the financial sector that funds it.
“Agriculture is still very risky. If you look at the data, the sectoral distribution of NPLs, in 2023, agriculture contributed about 52% to NPLs in Ghana. It has come down in 2024 to about 38, but it is still risky,” he stated.
His comments come at a time when stakeholders are pushing for increased financing for agriculture to ensure food security, improve livelihoods, and reduce Ghana’s import bill.
Why Are NPLs So High in Agriculture?
Experts point to a mix of climate-related risks, poor infrastructure, low mechanization, lack of insurance, and weak value chains as some of the key drivers of defaults in the sector.
Farmers and agribusinesses are often at the mercy of erratic weather patterns, post-harvest losses, market access challenges, and volatile pricing. These factors make consistent loan repayment difficult.
As a means of shielding itself from the risks, Prof. Assibey observes that banks are increasingly applying risk premiums to loans in the sector. This is raising interest rates to offset the probability of default. The result is a vicious cycle: higher interest rates discourage borrowing, which limits production and innovation, which then leads to weaker outcomes and more defaults.
“Banks will take the risk premium into price. But how do we derisk the system?” he quizzed.
The Need for Derisking
Given the crucial role of these two sectors to the economy, Prof. Osei-Assibey maintains that the state has no option but to derisk the agriculture sector.
This means more targeted government interventions, insurance schemes, guarantee funds, and strengthened value chains to make the sector more attractive for private finance.
“If we want to scale up credit to the sector, we have to begin to talk about derisking the sector. Because if the risk is low, pricing will be low to a large extent. But if the risk is high, they will price that in, and so the interest rate will go high,” he proposed.
Development finance institutions like DBG have already begun rolling out blended finance instruments, technical assistance, and guarantees. But industry players argue that a whole-of-government approach is needed, bringing together ministries of agriculture, finance, trade, and transport to develop a coherent, long-term derisking strategy.
The Bottomline
Agriculture plays a critical role in determining inflation and other macroeconomic variables that affect the standard of living of Ghanaians and the general health of the economy.
Already, the government is touting measures that will position the country to modernize its economy and reduce dependency on imports. The agricultural sector must be a key driver of inclusive growth. But if credit access continues to be constrained by high NPLs, the sector may remain trapped in a cycle of low productivity and low profitability.
This makes Prof. Osei-Assibey’s message timely and urgent that fixing agriculture’s credit woes is not just about pumping in more money, it’s about fixing the fundamentals that make it risky in the first place. Until that is done, agriculture will remain both the hope and the headache of Ghana’s financial system.
