Innovative credit scoring tool helps Ghanaian farmers move forward

Many smallholder cocoa and sorghum farmers in Ghana have to use a quarter of their yield to pay for farming supplies such as fertilizer and cleaning supplies. A bad harvest can make even those purchases impossible, and even the income from a good harvest might not be enough to pay for supplies in one instalment. As a result, buying farming supplies on credit is a matter of survival for many farmers in Ghana.

“For many smallholder farmers, it’s also difficult to arrange financing via official channels”, explains Alloysius Atta, CEO of Farmerline in Ghana. “They often don’t meet the requirements for loans from commercial banks. The lenders demand documents that the farmers often simply don’t have, or they want the farmers to offer property as collateral. But they don’t own any property, so they’re risky for lenders. And without a loan, they can’t maximize their yields, much less innovate and grow.”

Agritech companies like Farmerline offer hope to these farmers. “We offer farming supplies on credit. And we literally bring it to their doorstep, because many farmers live in such remote areas that they can’t pick up the supplies themselves. They can then pay for the products and machines we provide in flexible terms over the course of the season. That gives them disposable income all year round, so they can support themselves and save some money to invest wherever possible. We also offer them training in agricultural practices, up-to-date weather forecasts and business tips, which gives them the knowledge they need to increase their yields.”

Farmerline gives many farmers new opportunities, but the company must still pay attention to risks in order to remain financially healthy. For the past few years, the company has been using a digital tool for credit scoring that determines the farmer’s creditworthiness. “Credit scoring itself isn’t new”, Alloysius says, “But a credit scoring tool specialized for smallholder farmers is. Our developers have adapted existing software specifically for this group in Ghana. We feed our tool with data on things like crop yields, income and repayments, and information about the crops the farmer grows and the land he grows it on. That helps us to truly understand our clients.”

“The tool is an efficient and cost-effective way to visualize a farmer’s situation”, Alloysius adds. “That allows us to evaluate a farmer faster, which in turn expands our reach. We can offer better support to a farmer whom the tool rates positively, because we have a clearer idea of what they need. We can also help farmers who receive a negative credit score, for example by offering training to make them financially healthy, so that they can qualify for our financial assistance in the future.”

Funding from Rabo Foundation enables Farmerline to expand the credit scoring tool. “The more precise it is, the more insight we can gain into the farmer’s activities”, says Alloysius. “So we’re very happy with the support. It allows us to collect more details about farmers, their farms and their communities. The contacts we have with the leaders of local communities are also extremely important. They provide us with vital information about the farmers – especially during the pandemic. They help us to form a more complete picture of our clients, so that we can offer the best assistance we can provide.”

Farmerline has already financed around 34,000 smallholder farmers in 2020, and that number will continue to grow over the next few years. “We’re perfecting our system; not just the credit scoring tool, but also our training courses and logistics. The easier it is for farmers to get knowledge, money and resources, the faster they’ll be able to grow. That’s not only good for their own livelihoods, but also for the prosperity of their local communities. Plus; if smallholder farmers can operate more sustainably, they’ll be able to improve food security for all of Africa.”