Stories 3 mins Read 21 Nov 2024

Sinapi Aba Savings and Loans: Empowering Smallholder Farmers through Financial Inclusion

Around 90% of Ghana’s farmers are smallholders who cultivate less than 2 hectares of land and produce about 90% of the food consumed in the country. Traditional banking systems often categorize these farmers as “non-bankable” due to their lack of collateral and formal credit histories, leaving many trapped in poverty and unable to invest in improvements for their farms and lives. Additionally, gender inequality further complicates the situation, as women farmers encounter unique barriers in accessing resources and support. This is especially true in the north of Ghana, where poverty rates are among the highest in the country, and many households rely on subsistence farming. All of these challenges lead to financial instability.

Transformative Role of Sinapi Aba Savings and Loans

Sinapi Aba Savings and Loans (SASL) is a prominent microfinance and social enterprise organization in Ghana. Established in 1994, its primary goal is to support financially underserved individuals, especially low-income entrepreneurs, small business owners, and marginalized groups, to improve their livelihoods.

The name “Sinapi Aba“ is the local language version of the biblical expression “mustard seed” and reflects its mission to serve as a mustard seed (the mustard seed symbolizes growth, dependence, and faith) or a “seed of hope”. This name reflects the institution’s mission to empower individuals, particularly smallholder farmers, by providing them with access to financial resources that can help them cultivate better lives for themselves and their families.

Services Tailored for Farmers

SASL offers a range of financial products designed specifically for the needs of smallholder farmers, including:

Microloans: Small loans that enable farmers to purchase essential inputs like seeds, fertilizers, and equipment.
Savings Accounts: Encouraging clients to save for future investments and emergencies, fostering a culture of saving within communities.
Insurance Products: Protecting farmers against unforeseen events, such as crop failures or natural disasters, which can devastate their livelihoods.
Non-financial services like business training, capacity building, and mentorship

By focusing on agricultural financing, SASL helps farmers not only to sustain their families but also to contribute to their communities. The ripple effect of this empowerment is profound, as improved agricultural practices lead to better food security and economic stability in rural areas.

It emerged as a transformative force for smallholder farmers in Ghana. Sinapi Aba transformed in 2013 into a Savings & Loans i.e. a deposit-taking institution regulated by the Bank of Ghana. Sinapi Aba Trust established SASL with the goal of sustaining growth and providing a wider range of deposit, credit, and non-financial services to individuals and MSMEs. SASL has become a vital source of support for those often excluded from traditional banking systems.

General Statistics for Ghana

Smallholder Farmers: Approximately 90% of Ghana’s farmers are smallholders, who typically cultivate less than 2 hectares of land.
Food Production: Smallholder farmers produce about 90% of the food consumed in Ghana, emphasizing their critical role in ensuring food security.
Agricultural Contribution: Agriculture accounts for about 20% of Ghana’s GDP and employs over 52% of the workforce.
Access to Finance: Only about 10% of smallholder farmers in Ghana have access

Impact on Smallholder Farmers

Through its tailored financial products, SASL provides farmers with the capital needed to improve their agricultural practices. This access to finance is vital for increasing productivity and ensuring food security. SASL has significantly contributed to the livelihoods of thousands of farmers, empowering them to invest in their farms, leading to increased yields and better income stability. Additionally, by promoting savings and financial literacy, SASL equips farmers with the tools to manage their finances effectively, ultimately leading to improved economic resilience.

Growth and Expansion

SASL has experienced significant growth since its establishment. As of June 2024, the institution had more than 200,000 borrowers.

The Impact of AgriFI Investment

In 2022, SASL secured a €2.5 million investment from AgriFI, the European Union – funded Agriculture Financing Initiative (AgriFI), managed by EDFI Management Company.

The partnership with AgriFI has helped SASL’s capacity to serve more farmers and expand its financial offerings.

This investment also represents a shared vision for a more inclusive future. For SASL, it means the opportunity to innovate and develop new products that cater to the evolving needs of rural communities.

Building Resilience in Communities

SASL’s impact extends beyond individual clients; it fosters resilience within entire communities. By empowering farmers, the institution contributes to local economies and food security. The training programs offered by Sinapi Aba equip clients with essential skills in financial management, agricultural practices, and business development.

The team of Sinapi Aba believes that financial services should be accompanied by education and support. This holistic model ensures that clients are not only able to access funds but also understand how to use them effectively.

The name ’Sinapi Aba‘ is the local language version of the biblical expression ’mustard seed’ and reflects its mission to serve as a mustard seed (the mustard seed symbolizes growth, dependence, and faith) through which opportunities for enterprise development and income generation are given to the economically disadvantaged in society to transform their lives.

(Adjei, Arun, Hossain, Brooks World Poverty Institute, 2009)

In 2023, SASL provided 8,166 new loans, of which 2,501 to clients in the agriculture sector (i.e. 31%), the microcredit size loan usually provided below GHC 17 000 (EUR 1,000). Agriculture loans are provided directly to individuals or agri SMEs but are mostly given to groups of small holder farmers, cultivating on average less than 1ha of land.

Since the investment, SASL was able to increase the number of smallholders and small and medium enterprises benefiting from agricultural loans by 13% bringing it to a total of 25,013 in June 2024, among these, over 55% of whom are based in the 5 Northern Regions.

Achievements and Future Prospects

Since its establishment, SASL has achieved significant milestones in promoting financial inclusion, serving over 200,000 borrowers across various regions in Ghana. Looking ahead, SASL aims to continue expanding its services and reach. With the support of AgriFI and other partners, the institution plans to innovate its financial products, ensuring they remain relevant to the evolving needs of its clients. By focusing on technology and digital solutions, SASL seeks to enhance operational efficiency and improve client access to financial services. SASL aims to become one of the leading savings and loans companies in Ghana. To achieve this growth, SASL is focused on increasing deposits, local shorter debt, and long-term debt from international players. As SASL continues to grow, it is exploring innovative ways to leverage technology to enhance its services, including mobile banking solutions to improve access for farmers in remote areas.

As SASL sows the seeds of hope in Ghana, it embodies the belief that financial inclusion can be a powerful catalyst for change. With the support of partners like AgriFI, funded by the EU, SASL is poised to continue its mission of empowering smallholder farmers and building resilient communities for generations to come. The founders’ vision, rooted in compassion and community, will guide the organization as it navigates the future, ensuring that every farmer has the opportunity to thrive.

AgriFi Ghana Country Window

The European Union launched the AgriFI Ghana Country Window in partnership with the European Development Finance Institutions (EDFI) Management Company to address the pressing challenges faced by smallholder farmers in northern Ghana. This initiative, with a budget of €10 million, aims to enhance sustainable agricultural practices and improve livelihoods by investing in private sector enterprises and financial institutions.

The program focuses on developing inclusive agricultural value chains, particularly in key sectors such as cashew, groundnut, mango, rice, sorghum, soybean, and vegetables. By targeting the five regions in the North, the AgriFI Ghana Country Window seeks to modernize agri-food systems and increase production and income for approximately 12,000 smallholder farmers. This collaboration reflects a commitment to boost agricultural productivity, and to create employment opportunities and ensure food security in regions where these issues are critically important. Through its key role in financing small holders farmers, Sinapi Aba Savings and Loans is the typical intermediary that enables direct support to small farmers in their daily tasks and, through its actions, gradually lifts them out of poverty. This is why AgriFI Ghana Country Window is supporting this microfinance institution.