… as risk mitigation measures improve
Commercial banks are ready to pump more funds into the agriculture sector if additional measures are introduced to de-risk the sector, the Head of Agribusiness at Absa Bank, William Nettey, has said.
According to him, the nature of banking makes every institution hesitant to invest funds in a venture that seems to be of high risk; most times because of inadequate information which impedes proper planning, projection and the requisite cover needed to promote disbursement of funds.
“We are getting more interested in the sector because some of the risk areas are being mitigated. One of the challenges was the lack of information, but now we are seeing a lot more research on the sector being published; and we recently had the Ghana Census of Agriculture published. Gradually, agricultural is being supported to get quality data. Information is what drives what all the financial institutions do.”
“The support being provided by the Ghana Exim Bank, Ghana Incentive Based Risk Sharing Agricultural Lending (GIRSAL) and Rural Development Fund to make sure that we can get some cover for the loans we give out is really helping,” he said exclusively to the B&FT ahead of the Ghana Economic Forum (GEF) to be held at Kempinski Gold Coast Hotel on November 9-10.
Mr. Nettey explained that the number of private and public risk-mitigation measures which have been introduced has encouraged commercial banks to lend more to the sector in the past few years; thus showing optimism that the sector, which is pegged to hold the highest economic growth potential of the country, will see a lot more support from commercial banks if more measures are introduced.
“With these, we are able to work with some insurance companies to ensure that we cover our risks. Information helps us to partner with some financial institution so they buy some of the risks we are taking on, and also help to reduce interest rates for the farmer or agribusiness person coming for the facility. The use of technology has also helped to cut down the risk as well, and buildings being put up to prevent post-harvest losses are also helping,” Mr. Nettey said.
Agric funding data
According to the Statistical Bulletin (November 2019) report, the sectoral distribution of outstanding credit by banks shows that the agriculture and fishing sector received increased financial support – especially toward last quarter of the year. Credit advances to the sector increased to GH¢2.5billion at the end of November 2019.
This is quite significant – because as of October 2018 through to August 2019, credit advanced to the agriculture and fishing sector never went above GH¢1.7billion. The sector only began to see increased financial support from September 2019, when more than GH¢1.8billion credit was advanced by banks and further increased to GH¢2.3billion in the following month.
The development allows a sigh of relief for players in the sector, especially farmers and agri-businesses— knowing that banks are now easing their credit stance and are ready to provide them with needed financial assistance; an opportunity they have always been waiting for. It is projected that these figures will be higher in 2020.
The Ghana Economic Forum (GEF) is a gathering of Ghanaian business leaders to chart the path to economic prosperity. It is scheduled to take place on November 9 and 10, 2020 at the Kempinski Hotel, Gold Coast City, Accra. The event is on the theme ‘Resetting the economy beyond COVID-19; Building economic resilience and self-sufficiency’.
It is designed to bring together over 500 local and international business leaders to dialogue and chart a clear path for Ghanaian businesses to hone the Ghanaian economy.
This year’s discussions will focus on several areas including energy, agriculture, entrepreneurship and innovation, banking and finance, and other areas crucial to the development of Ghana’s economy.