2025 Farmer’s Day: Farmers call for a 2% rate of interest on loans to spice up farming actions – Life Pulse Daily

Introduction

On 2025 Farmer’s Day, Ghana’s farming community sent a clear message: without affordable credit, local agriculture cannot thrive. The president of the Concerned Farmers Association of Ghana, Nana Oboadie Boateng Bonsu, called on the federal government to introduce a 2% interest rate on agricultural loans. This proposal aims to boost farming productivity, support the “Feed Ghana, Eat Ghana” initiative, and strengthen food security by enabling farmers to access the capital they need at lower costs.

Currently, interest rates on agricultural loans range from 22% to 33%, creating significant barriers for smallholder farmers. These high rates make it difficult to cover production costs, adopt new technologies, and expand operations. By reducing the interest rate to 2%, farmers argue they can increase output, improve quality, and compete more effectively with imported produce. This article explores the context, rationale, implications, and practical considerations of this proposal, while comparing it to similar policies in other countries and outlining potential legal and economic impacts.

Analysis

Why 2%?

The demand for a 2% interest rate is not arbitrary. It reflects a strategic benchmark aimed at making credit accessible to farmers who operate on thin margins. In many advanced agricultural economies, government-backed loans carry single-digit or near-zero interest rates to support rural development and food production. For Ghanaian farmers, a 2% rate would represent a dramatic reduction from current levels and could serve as a catalyst for increased investment in seeds, equipment, irrigation, and post-harvest infrastructure.

Current Challenges in Agricultural Finance

Ghanaian farmers face several financial obstacles:

• High interest rates (22%–33%) increase the cost of borrowing.
• Limited access to formal credit due to lack of collateral.
• Seasonal income fluctuations that complicate repayment schedules.
• Insufficient financial literacy and extension services.

These factors contribute to low productivity and discourage youth from entering agriculture. The 2% proposal seeks to address the most immediate barrier: the cost of capital.

Impact on Local Food Production

Advocates argue that affordable credit would directly enhance the quality and quantity of locally grown foods. Nana Oboadie highlighted Ghana’s superior tomatoes and the declining production of local onions and shallots, particularly from the Volta Region. With cheaper loans, farmers could invest in improved seeds, pest management, and storage facilities, helping local produce regain market share against imports from Niger and other neighbors.

Supporting the “Feed Ghana, Eat Ghana” Initiative

The 2% interest rate proposal aligns closely with national food security goals. The “Feed Ghana, Eat Ghana” campaign encourages Ghanaians to consume locally produced foods, reduce dependency on imports, and support domestic farmers. Affordable credit would empower farmers to meet this demand consistently and at scale.

Global Comparisons

Several countries have implemented low-interest or subsidized agricultural loan programs:

• India: Kisan Credit Card schemes offer interest subvention rates around 4% for timely repayment.
• China: Government-subsidized agricultural loans often carry rates below 5%.
• United States: USDA Farm Service Agency loans feature rates between 2% and 5% for eligible borrowers.

These examples demonstrate that targeted credit policies can play a key role in modernizing agriculture and enhancing food security.

Summary

The 2025 Farmer’s Day call for a 2% interest rate on agricultural loans is a response to the high cost of credit that currently limits farming productivity in Ghana. The proposal, led by the Concerned Farmers Association of Ghana, aims to reduce financial strain on farmers, boost local food production, and support national food security initiatives. By aligning loan costs with those in other developing and developed agricultural economies, the policy could stimulate investment, improve yields, and encourage sustainable farming practices.

Key Points

Practical Advice

For Policymakers

Consider piloting a low-interest agricultural loan program targeting registered smallholder farmers. Pair reduced rates with financial literacy training and flexible repayment terms aligned with harvest cycles. Monitor outcomes using clear metrics such as yield improvement, loan repayment rates, and local market share.

For Farmers

Engage with farmer cooperatives and associations to strengthen collective advocacy. Maintain accurate records of production costs and revenues to improve creditworthiness. Explore existing government and NGO programs while advocating for policy reforms.

For Consumers

Support local farmers by choosing Ghanaian-grown produce. This strengthens demand and justifies investment in agricultural credit programs. Participate in awareness campaigns that promote the economic and nutritional benefits of local foods.

Points of Caution

• Risk of loan defaults if interest rates are too low without proper oversight.
• Potential for mismanagement or misallocation of funds without transparent monitoring.
• Fiscal constraints: Subsidizing interest rates requires government budget allocation or central bank support.
• Need to ensure that benefits reach smallholder farmers, not just large agribusinesses.
• Import dependency may persist if infrastructure and market access are not simultaneously improved.

Comparison

Comparing Ghana’s current agricultural lending landscape with other nations reveals significant disparities:

This comparison underscores the opportunity for Ghana to adopt a more supportive credit framework that reflects the strategic importance of agriculture.

Legal Implications

Implementing a 2% interest rate policy would require coordination between the Ministry of Food and Agriculture, the Bank of Ghana, and commercial banks. Legal frameworks would need to define eligibility criteria, oversight mechanisms, and accountability measures. Any subsidy program must comply with fiscal responsibility laws and international trade agreements to avoid disputes related to market distortion. Additionally, anti-corruption safeguards would be essential to ensure transparency and equitable access.

Conclusion

The 2025 Farmer’s Day demand for a 2% interest rate on agricultural loans highlights a critical need for financial reform in Ghana’s farming sector. High borrowing costs are stifling productivity, undermining food security, and weakening the position of local produce in domestic markets. While the proposal presents fiscal and administrative challenges, it also offers a pathway to modernize agriculture, empower smallholder farmers, and achieve national self-sufficiency in food production. By learning from global best practices and implementing the policy with proper safeguards, Ghana can turn this advocacy into a sustainable development success.

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