NanaMartinson/ghana-climate-ecl-model-maize

Climate-adjusted ECL model project for agricultural lending in Ghana # **Ghana Climate Risk ECL Model for Maize Production (2003-2023)** Author: Nana Nshira Martinson Contact: nanamartinsonnnm@gmail.com Date: November 2025 ## **Executive Summary** This project presents a Climate-Adjusted Expected Credit Loss (ECL) model designed to stress-test a $100 million Ghanaian maize lending portfolio against future climate shocks. The core methodology uses detrended crop yield to establish a statistically robust link between climate anomalies and credit risk, a critical requirement for forward-looking financial stability assessments. The core finding confirms that while overall yield growth is strong, climate is the largest single non-economic driver of yield volatility, triggering a non-linear jump in Probability of Default (PD) that is effectively mitigated by the GIRSAL credit guarantee scheme. ### **Key Insights & Financial Impact** | Key Metric | Finding (Yield-Based Model) | Relevance | | ----- | ----- | ----- | | Climate Contribution to Yield | 33.4% of detrended yield variance explained by climate variables. | Systemic Risk: This confirms climate is the largest single non-economic driver of yield volatility. This 33.4% represents the non-diversifiable, systemic portion of portfolio risk, demanding targeted adaptation funding. | | Severe Drought Stress | PD Multiplier of 1.09 (a 9% increase in PD). | Portfolio Instability: Confirms that climate operates as a tail risk—a sudden, non-linear shock that increases the default rate and threatens financial stability, despite strong long-term growth. | | GIRSAL Value (Baseline) | $1.57 Million in ECL reduction. | Risk Transfer Efficiency: The scheme provides a 35% reduction in expected losses under normal conditions, de-risking commercial bank exposure. | | GIRSAL Value (Under Stress) | $1.71 Million in ECL reduction. | Proof of Resilience: The absolute dollar value of the guarantee increases under the Severe Drought scenario, proving the mechanism is most effective when financial stabili …