By Kwasi KYERE
Access to credit remains one of the most critical drivers of economic growth and social development.
Yet, in Ghana, traditional credit systems have often focused on urban-based businesses, formal enterprises, and established individuals, leaving behind key demographics that hold the potential to transform the nation’s economic trajectory.
Women entrepreneurs, youth entrepreneurs, and those in agriculture and agribusiness represent three pivotal groups that, if supported with tailored credit solutions, could unlock unprecedented growth for the country.
This article explores the rationale for extending credit to these groups and provides compelling evidence for financial institutions and policymakers to prioritize them over conventional credit practices.
Why focus on women entrepreneurs?
- Women are engines of economic growth
Globally, women reinvest up to 90percent of their income into their families and communities, compared to 30-40percent by men. In Ghana, women make up 57percent of the workforce in the informal sector, where they dominate markets such as retail trade, food processing, and textiles. By providing credit to women entrepreneurs:
- Economic impact: Financial institutions can stimulate household consumption and increase community welfare.
- Enhanced business resilience: Studies show that women-led businesses are more likely to repay loans on time, with lower default rates compared to male-led businesses.
- Bridging the gender credit gap
Despite their contributions, women entrepreneurs face systemic barriers to accessing credit:
- Lack of collateral: Many women lack land or property ownership, a prerequisite for traditional loans.
- Bias in lending practices: Women are often perceived as higher-risk borrowers due to stereotypes, despite evidence to the contrary. Tailored credit products such as group loans, collateral-free microloans, and lower interest rates can help bridge this gap. Moreover, supporting women aligns with Ghana’s commitment to the UN Sustainable Development Goals (SDG 5: Gender Equality).
Youth entrepreneurs: catalysts for innovation and job creation
- Youth as Ghana’s economic backbone
With over 57percent of Ghana’s population under 25 years, the youth represent untapped potential for innovation and entrepreneurship. Youth entrepreneurs bring fresh perspectives, leveraging technology and creativity to address contemporary challenges. However, their potential is undermined by systemic challenges:
- High unemployment rates: Ghana’s youth unemployment rate stands at approximately 12percent, with many relying on entrepreneurship as a survival strategy.
- Limited access to capital: Banks and financial institutions often overlook young entrepreneurs due to their lack of credit history, collateral, or business experience.
- Impact of youth-focused credit
Providing targeted credit to youth entrepreneurs will:
- Stimulate innovation: Credit will enable young entrepreneurs to scale tech-driven solutions in areas like fintech, agritech, and e-commerce.
- Drive job creation: Youth-led businesses often employ their peers, addressing Ghana’s unemployment challenge.
- Leverage technology: Younger entrepreneurs are adept at integrating digital solutions into their ventures, ensuring scalability and global competitiveness.
Agriculture and agribusiness: Ghana’s untapped goldmine
- Agriculture as the Foundation of Ghana’s Economy
Agriculture contributes about 20percent to Ghana’s GDP and employs over 44percent of the workforce, yet the sector receives only a fraction of the country’s total credit. Farmers, particularly smallholders, face:
- Seasonal cash flow challenges: Many farmers cannot afford inputs such as seeds, fertilizers, and machinery.
- Market risks: Price fluctuations and post-harvest losses further deter traditional lenders.
- Agribusiness as a value creator
Investing in agribusiness goes beyond primary production to create value in processing, packaging, and distribution. With the right financial support:
- Food security will improve: Credit allows farmers to adopt modern techniques, increasing productivity.
- Export revenues will rise: Agribusiness can help Ghana diversify its export portfolio, reducing reliance on gold and cocoa.
- Jobs will be created: The value chain for agriculture—from farm to market—offers extensive employment opportunities.
- Success stories as proof of concept
Countries like Kenya and Nigeria have demonstrated the power of credit in agriculture. In Kenya, the use of digital credit platforms like M-Pesa has enabled farmers to access microloans, increasing productivity by over 25percent. Ghana can replicate these successes through mobile-based lending and agricultural credit schemes.
Advantages over traditional forms of credit
- Higher social impact: Traditional credit tends to favor established, urban-based businesses. Extending credit to women, youth, and agriculture ensures that marginalized groups benefit, fostering inclusive growth.
- Expanding the customer base: Serving underbanked groups such as women, youth, and farmers presents financial institutions with an opportunity to expand their customer base, ensuring long-term profitability.
- Alignment with development goals: By focusing on these groups, financial institutions align with national and global development priorities, including SDGs related to poverty reduction, gender equality, and sustainable economic growth.
Policy and institutional recommendations
- Tailored credit products
- For women: Introduce collateral-free loans, lower interest rates, and group lending models.
- For youth: Provide startup loans with flexible repayment terms and integrate credit education programmes.
- For agriculture: Develop weather-indexed insurance products and input financing schemes.
- Leverage technology
Digital platforms and mobile banking can reduce costs, enhance credit access, and ensure transparency in loan disbursement.
- Partnerships and capacity building
- Collaborate with development agencies, NGOs, and government programmes to de-risk lending to these groups.
- Offer training programmes in financial literacy, business management, and modern farming techniques.
Why are women, youth, and agricultural entrepreneurs marginalized in credit access in Ghana?
- Structural barriers
- Collateral requirements: Traditional credit models often require land, property, or other high-value assets as collateral. In Ghana, women, youth, and smallholder farmers frequently lack such assets due to cultural, legal, and systemic inequalities. For instance:
- Women represent less than 10percent of landowners in Ghana, limiting their ability to access formal credit.
- Youth, who are just starting their entrepreneurial journey, rarely have sufficient assets to secure loans.
- Perceived risk by lenders
- Financial institutions often consider lending to these groups high-risk due to:
- Lack of credit history for youth and first-time borrowers.
- Seasonal income variability in agriculture, influenced by unpredictable weather and price volatility.
- Perceptions of low business acumen among marginalized groups, even though this is often unfounded.
- Lack of tailored credit products
- Many financial institutions operate with rigid loan structures, focusing on urban, formal-sector businesses. Women, youth, and farmers, who require smaller, flexible, and less cumbersome loan terms, are excluded by default.
- Cultural and social bias
- Women face gender stereotypes that question their ability to manage businesses effectively.
- Youth are seen as inexperienced and less likely to succeed in entrepreneurial ventures.
Significant benefits for lending institutions
- Expanded market reach and increased profitability
- Untapped markets: Marginalized groups represent a large, underserved market with immense potential. Extending credit to these groups can bring in a new customer base.
- Increased loan repayment rates: Evidence suggests women have a 97percent repayment rate globally, outperforming men in credit repayment.
- Improved financial inclusion
Lending to women, youth, and farmers promotes financial inclusion, which benefits institutions by:
- Strengthening customer loyalty through long-term relationships.
- Diversifying portfolios and reducing dependency on traditional sectors.
- Enhanced social and economic impact
Institutions that invest in these sectors contribute to:
- Economic growth: Credit drives entrepreneurship, job creation, and productivity, enhancing national GDP.
- Community development: Loans to marginalized groups improve community welfare, creating a stronger local economy.
- Reputation and partnerships
Institutions that focus on marginalized groups attract goodwill, partnerships, and funding from international development organizations like the World Bank, IMF, and local NGOs.
Practical examples from other countries
- Kenya: Empowering farmers through credit
- Challenge: Smallholder farmers in Kenya faced challenges accessing loans due to collateral requirements and seasonal incomes.
- Solution: Equity Bank Kenya launched the Kilimo Biashara programme, a loan product tailored to small-scale farmers.
- Results:
- Increased access to fertilizers, seeds, and equipment improved productivity by over 30percent.
- The programme, in partnership with the Kenyan government and NGOs, created over 100,000 jobs in the agricultural value chain.
- Equity Bank expanded its customer base by focusing on this underserved segment, reporting higher loan repayment rates due to the farmers’ increased incomes.
- Bangladesh: Grameen Bank and women entrepreneurs
- Challenge: Women in rural Bangladesh were excluded from traditional lending systems due to lack of collateral.
- Solution: Grameen Bank pioneered microfinance by offering collateral-free loans to groups of women.
- Results:
- Empowered over 9 million borrowers, 97percent of whom are women.
- Dramatic reduction in poverty levels in communities where loans were disbursed.
- Loan repayment rates exceeded 95percent, proving women’s reliability as borrowers.
- Nigeria: youth in agribusiness
- Challenge: High youth unemployment and underfunded agriculture sector.
- Solution: The NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending) initiative provided credit guarantees and risk-sharing facilities to banks lending to youth entrepreneurs in agriculture.
- Results:
- Enabled over 400,000 young farmers to access credit and modern agricultural technologies.
- Banks saw improved loan performance, with default rates significantly reduced due to the support structures provided.
- Boosted Nigeria’s agricultural output by 15percent, reducing food imports.
- India: financial inclusion through technology for farmers
- Challenge: Fragmented smallholder farming sector with limited access to finance.
- Solution: The Indian government partnered with private banks to launch Kisan Credit Cards (KCC), enabling farmers to access short-term loans for agricultural inputs.
- Results:
- Over 40 million KCCs issued, with farmers benefiting from flexible, low-interest credit.
- Increased agricultural productivity and ensured food security for millions.
- Financial institutions gained 30percent portfolio growth from rural customers.
Economic and social impact of prioritizing these groups
- Job Creation
- In Ghana, youth entrepreneurs could create 50,000+ jobs annually if supported with credit.
- Women-led businesses have been shown to hire 50percent more local staff compared to male-led counterparts.
- Boosting GDP
- According to the World Bank, increasing access to credit for women entrepreneurs alone could add US$5 billion to Ghana’s GDP annually.
- Agriculture-focused credit could increase agricultural productivity by 25percent, reducing Ghana’s dependence on imports.
- Poverty reduction and financial inclusion
- Targeting marginalized groups ensures wealth distribution and reduces inequality, bringing 70percent of Ghana’s informal sector into the formal financial system.
- Financial inclusion creates a ripple effect, improving savings culture, investment rates, and economic resilience.
Conclusion
Lending institutions in Ghana must recognize the vast opportunities in extending credit to women entrepreneurs, youth entrepreneurs, and those in agriculture. As demonstrated by successful programmes in Kenya, Bangladesh, Nigeria, and India, such initiatives yield not only financial returns but also drive national economic growth, enhance community welfare, and promote financial inclusion.
The time is ripe for Ghana’s financial institutions to adopt innovative, inclusive lending practices that will transform the nation’s economic landscape and ensure sustainable development for generations to come. Extending credit to women entrepreneurs, youth entrepreneurs, and the agriculture sector is not just an economic imperative; it is a moral and social necessity. These groups represent the heart of Ghana’s economy, and their success will drive the nation toward sustainable growth and development.
Financial institutions must pivot from traditional credit models to embrace this inclusive approach, unlocking potential where it is most needed. The time to act is now—because the future of Ghana depends on empowering its people today.
>>>the writer is a Senior Consultant at Infinity Prestige Consultancy Limited. He can be reached at +233209345895
