The Managing Director of the Agricultural Development Bank PLC, Dr. John Kofi Mensah, has hailed the Ghana Incentive-based Risk Sharing for Agricultural Lending Scheme’s (GIRSAL) introduction as a major game-changer for agricultural lending in the country.
According to Dr. Kofi Mensah, introducing GIRSAL into the agricultural lending space will further de-risk the sector and make it more comfortable for commercial banks, which hitherto feared to venture into agricultural financing and lend to the sector.
“As the leading commercial bank for agricultural lending in the country, we see that introducing GIRSAL into the agricultural lending space will positively impact lending in the sector. I wish to commend government, the Bank of Ghana and all other stakeholders for such a wonderful initiative aimed at de-risking agricultural lending in the country,” he said.
Speaking at the re-launch of GIRSAL at the Kempinski Gold Coast Hotel in Accra under the theme ‘Re-launch of the GIRSAL Scheme and the Launch of an Agribusiness Public-Private Partnership Platform’, Dr. Kofi Mensah said customers in the agricultural value chain have been constrained in their access to credit due to absence of collateral, credit history and reliable financial accounts which would help financial institutions to better appraise their creditworthiness.
According to him, the impact of GIRSAL has been monumental in these few years of operation, and has eased the constraints and bottlenecks associated with giving loans to customers in the sector by absorbing part of commercial banks’ default risk.
“GIRSAL has provided commercial banks with an appreciable level of comfort to stimulate them into increasing credit supply for the credit-constrained players in the agricultural sector. We at ADB are happy to note that the start of operations of GIRSAL has stimulated competition in agricultural lending in Ghana. While the Agricultural Development Bank remains the main player in agricultural lending, we have in the last few years observed interest shown by other commercial banks in lending to the sector,” he said.
Dr. John Kofi Mensah is hopeful the renewed enthusiasm seen in some commercial banks to lend to the agricultural sector – hitherto considered very risky – is underpinned by the risk sharing activities of GIRSAL, which has enabled the commercial banks to expand their risk appetites for agricultural and agro-allied projects.
He further indicated that one major additional functionality of GIRSAL that will further help the agricultural sector is their ability to negotiate better lending conditions; such as lower interest rates, longer loan terms, and less burdensome collateral requirements. “They have always argued that once their interventions reduce the risk of lending, it is important for customers to benefit from the reduced risk profiles,” he said.
The ADB Managing Director is hopeful that the operations of GIRSAL will be financially sustainable in the long-run to enable them adequately play their role in the agricultural lending space.
He further urged players in the agricultural value chain – especially Customers who are the ultimate beneficiaries of credit risk guarantees provided by GIRSAL – not to renege on their loan repayment obligations in order not to actualise the biggest fears associated with such credit risk guarantee schemes.
Dr. Kofi Mensah also urged commercial banks not to let the credit risk guarantee by GIRSAL affect effective appraisal, monitoring and recovery of loans; and more importantly, not to view GIRSAL’s credit risk guarantee as an absolute substitute for collateral. These, if done, will ensure the sustainability of GIRSAL’s operations which we so need.
He indicated the preparedness of ADB and other partner financial institutions to work with GIRSAL on consolidating gains made, even as they prioritise some selected agricultural value chains to achieve import substitution and export objectives.
From their start of operations in July 2019 to June 24, 2022, GIRSAL has provided Credit Risk Guarantees totalling about GH¢301.30million – covering loans totalling GH¢629.60million granted by Ghanaian commercial banks to players in the agricultural value chain; and the Agricultural Development Bank PLC remains the single-largest partner financial institution.
Dr. John Kofi Mensah
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