Availability of financial services, such as savings and credit (loans), is crucial to attaining every economy’s financial goals. However, one of the world’s biggest concerns, particularly in emerging and developing economies, is financial inclusion and access to credit.
In Ghana, agriculture remains a vibrant economic activity and serves as an avenue for employment and a source of revenue for most rural households. This sector is dominated by smallholder farmers who contribute enormously to the food security of the country through their subsistence production. Yet, their ability to access credit from financial institutions is limited and/or inaccessible.
Farmers’ purchasing power increases as a result of increased access to financial services, and they are able to invest in new farm technology. They take part in credit-based schemes to improve access to financial services. However, due to several obstacles, such as collateral securities, smallholder farmers’ access to financial services such as loans is hampered.
Global cocoa production statistics indicate that Ghana is ranked second in the world, with the cocoa industry supporting the livelihoods of over 800,000 farm families. The majority of smallholder farmers in Ghana are located in rural areas and face challenges in obtaining formal financial services and other resources to support their farming activities.
There is substantial evidence of farmers’ lack of access to and availability of finances, especially in the cocoa sector in Ghana. These finances are needed to procure raw materials, farming equipment, and inputs and pay labour fees. However, rural and community banks that are the forerunners in advancing credit to cocoa farmers in deprived rural cocoa-growing communities have performed inadequately.
Cocoa farmers through partners of Ghana cocoa board are finding or establishing their own means to address their need for financial services and enhance their livelihood by forming locally constituted and self-managed associations. One of the means is Village Savings and Loans Associations (VSLA). VSLA is an informal financial intervention that is built wholly on the savings made by members and the interest on loans, with no capital investment from an external organisation. Compared to other savings groups, VSLA groups have been found to facilitate entrepreneurship amongst the rural populace.
The VSLA model empowers the poor to act as their own bankers, relying exclusively on membership savings and loan interest, with no outside direct investment from organizations
The emergence of Village Savings and Loans Association (VSLA) is extensively accredited as an opportunity of providing access to financial credit to the rural poor (especially women) in remote areas of the world.
VSLA is believed to have been introduced by Cooperative for Assistance and Relief Everywhere (CARE) International in Niger in 1991. Thereafter, CARE international, as well as other domestic and international Non-Governmental Organizations (NGOs), have pioneered the introduction of the concept in most villages located in Africa. Through the loans from VSLAs, members can access cash that assists in mitigating the volatility of farm income and also improving the ability of farming households
The emergence of Village Savings and Loans Association (VSLA) is extensively accredited as an opportunity of providing access to financial credit to the rural poor especially women in remote areas of the world
Through the loans from VSLAs, cocoa farmers or members can access cash that assists in mitigating the volatility of farm income particularly in the minor season and also improving the ability of farming households.
VSLA will ensure that there is an improvement in the income of rural households or cocoa farmers, support asset accumulation, support educational expenditures and help reduce the rate of school drop-out among rural households. It will also ensure improvement in rural residents’ off-farm income and also has the potential of providing rural communities with access to financial services, thereby promoting financial inclusion through the provision of loans to rural households.
By enabling the poor to manage risk, establish and grow a business, level out consumption, and boost or expand household income, expanding access to financial services holds the key to reducing poverty in cocoa growing communities and improving development outcomes.
VSLA stands to gain and remove these barriers to credit access in circumstances where most cocoa farmers lack collateral, documented credit history, or other qualifications necessary to have access to conventional credit.
Building cocoa farmers’ capacity on financial literacy, savings ability through the establishment of VSLAs in various cocoa growing communities will improve affordability and accessibility to credit as well improved living conditions.
Kabiru Mohammed
District Extension Coordinator
Cocoa Health and Extension Division
