Banks’ knowledge of agriculture financing is still markedly lacking despite the sector’s contribution to national development, the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending Project (GIRSAL) has said.
It said banks’ lack of expertise in agriculture financing, coupled with loan applicants’ failure to meet technical feasibility and financial viability requirements, has contributed to banks having to turn down the majority of agribusinesses applications; thereby becoming the main factors behind the lack of credit support for the agricultural sector.
“They [banks] see agriculture as a risky venture, which we are trying to change. It is all because of the fact that most banks lack the expertise to understand agriculture financing,” GIRSAL’s Chief Operating Officer, Takyi Sraha, told the B&FT in an interview.
To solve the knowledge-gap, GIRSAL says it is collaborating with the National Banking College to roll out specially designed curriculums for banks’ staff, under its technical assistance programme.
Under the partnership, Mr. Sraha said, about 300 staff from 21 financial institutions underwent training in the various agricultural value chains: production matrixes, crop cycle, risk mitigation and the various appraisal techniques in assessing agricultural projects, between August 2020 and September 2021, at zero cost to beneficiaries.
“With a grant from Alliance for a Green Revolution in Africa (AGRA), we were able to provide the training in terms of taking them through the various agricultural value chains – which explains why the technical assistance facility part of GIRSAL is so important.
“We are collaborating with the National Banking College, and through that we have been able to develop curriculums for a three-model training,” he said.
Going forward, he explained, the goal is to cede the responsibility of training bankers in agriculture financing to the National Banking College, but still provide them with technical support: “We are still working with AGRA to provide them a follow-on grant. This comes at no cost to the bankers, unlike other training programmes”.
He said the training aims to help banks appreciate the sector’s nitty-gritties and the need to treat agribusinesses differently from others.
GIRSAL, a non-bank financial institution, aims to de-risk agricultural financing by the financial institutions through issuing agricultural credit guarantee instruments – to enhance the total amount of credit available to the agricultural and agribusiness sectors.
The Statistical Bulletin report for the second quarter of 2021 shows that only 3.2 percent of the total funds banks dispensed as loans went to the agriculture sector. The data reveal that out of the GH¢47.5billion banks distributed as credit within the period, just GH¢1.6billion went to the sector.
The relatively low lending level to the sector is despite the fact that agriculture remains a leading contributor to economic growth, accounting for 19.25 percent of GDP in 2020. It is also the largest employer, with more than half of the country’s 30.8 million population earning their livelihood from the value chain.