Editorial: Credit guarantee financing system can replace fertiliser subsidy

agricultural sector policy
CEO, Mr. Kwesi Korboe

The Ghana Incentive-Based Risk-Sharing System for Agricultural Lending Project (GIRSAL) is proposing a credit guarantee financing system for future fertiliser subsidy programmes (FSP) to aid growth in the agricultural sector.

GIRSAL’s Chief Executive Officer, Kwesi Korboe, believes the credit guarantee-backed financing arrangement will tremendously reduce interest costs on fertilisers to farmers.

Commercial letters of credit (LCs), according to the GIRSAL boss, can offer guarantees to sellers that the monies will be paid while assuring customers that no payment will be made until the goods are received.

This will ensure cost reduction and encourage competition to drive fertiliser prices further down. Mr. Korboe says government does not have to pay money to companies for the supply of fertiliser, adding: “The credit guarantee finance strategy will eliminate rent-seeking”.

The FSP under the PFJ has been allegedly dented with rent-seeking, whereby companies have engaged in manipulating the policy for increased profits – though the quality of inputs supplied are often questionable.

Dr. George T.M. Kwadzo, GIRSAL’s FSP assessment project lead, said the entire PFJ programme under which the subsidy programme falls lacks policy coherence. GIRSAL’s assessment recommended that timely availability of subsidised fertilisers and seeds must be considered in future subsidy programmes.

The assessment also proposed that subsidised fertilisers should be provided all year round to cover both minor and major seasons.

“Warehouse systems in districts must be prioritised. Commercial farmers must be integrated into the FSP programme, while digitisation must be deployed in fertiliser distribution and mechanisms to link farmers to markets must be addressed,” the assessment recommends.

Minister of Food and Agriculture, Bryan Acheampong, revealed that from June this year the ministry will roll out a more sustainable five-year food security and availability plan to replace the PFJ.

Some input distributors also desire that subsidies on fertiliser be cancelled to enable these companies maintain extensive import programmes to ensure inputs are available on the market to farmers at all times.

Dr. Charles Nyaaba explained that farmers have become dependent on these subsidies to the extent that current delays in distribution and unavailability of fertiliser are posing serious challenges to farmers under the PFJ policy.

Smuggling, hoarding and corruption continue to be the major challenges impeding the successful implementation of government’s fertiliser subsidy programme (FSP) for smallholder farmers, a study by the Peasant Farmers Association of Ghana (PFAG) has revealed.

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