Loans for caterers: Creating better markets for small farmers

Caterers in Ghana have been receiving training to strengthen their entrepreneurial skills, but they still face difficulties because many lack the financial capital to grow and sustain a business. In addition to this, regular payments from the government for catering services to school feeding are often delayed; this is something that most caterers without substantial capital cannot withstand. Thus, when it comes to complying with the aims of 'home grown school feeding' and buying from smallholder farmers, these caterers are unable to do so.

Smallholder farmers do not have the means to extend credit and cannot supply their products without being paid promptly, so a vicious cycle ensues. This situation is being addressed and remedied in the northern region of Ghana, where the SNV Ghana team worked to set up a caterer loan scheme to make credit available for caterers.

Through the establishment of a loan guarantee fund in agreement with rural banks, caterers will be able to make prompt payments for the food products they purchase directly from farmers, rather than rely on traders who are more often equipped to provide credit. The caterers will then have funds they can use to expand their businesses and allow them to purchase directly from smallholder farmers, even when payments for their own services are delayed.

SNV Ghana has worked with the Bonzali and Tizza Rural Banks to offer affordable rates to caterers in Tamale, Tolon, and Karaga by establishing the loan guarantee fund, which should benefit about 30 school feeding caterers. Caterers who receive the credit must ensure that they purchase approximately 80% of the food used to prepare school meals from smallholders. As a result, it is expected that smallholder farmers will no longer be excluded from that market.

SNV Ghana plans on tracking and monitoring the caterers’ purchases through reviewing their records, which will reveal what is actually being bought from local smallholders. To ensure good tracking, SNV is providing training to caterers in order to improve their record keeping skills, something they had previously lacked. SNV is also working with local district assemblies, which are school feeding implementers, to motivate them to hire the services of specific caterers that have been buying from local farmers.

The Bonzali and Tizza Bank will be providing these loans to caterers starting in May 2014 up until September 2015. Watch this space for the results!