ADB partners GIRSAL to de-risk agric

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Managing Director of the Agricultural Development Bank (ADB) Dr. John Kofi Mensah has disclosed that the establishment of key institutions like the Ghana Incentive Based Risk Sharing Agricultural Lending (GIRSAL) has helped the bank invest more in the agricultural sector.

According to the ADB MD, since 2018 the bank has introduced an initiative to de-risk the risky aspects of agribusiness. These, he said, have consistently choked the industry of needed funding as finance institutions deem it a very high-risk sector.

“GIRSAL was established to serve as a guarantor for the agricultural sector, and depending on the sector they are able to guarantee up to 70% for the farmer; and this has really helped, since there is secured security for investing in the sector,” he said.

He averred that majority of banks have failed to offer portfolios for agriculture activities because of their potential to record major losses post-harvest. He revealed that with such a guarantee, the bank has introduced complete value-chain funding for all categories in Agriculture.

Dr. Kofi Mensah disclosed these on the PM Express on Joy News last Thursday, and noted that the initiative is financing various aspects like over-production and lack of storage infrastructure to address these challenges permanently.

“ADB has taken control of the whole value chain, and therefore is not restricting itself to particular areas and hoping for other banks to fund the others. For example, in the poultry sector we do financing of the value chain including feed, hatchery, rearing of birds, processing, and marketing. The linkages along the chain, like veterinary services and production of grain for feed mills, have also been taken control of and bunched together as types of agribusiness on their own,” he added.

He stated that ADB has reverted to its core mandate of financing agribusiness, turning away from what it used to do in the past. The bank, he said, is doing this together with agribusiness participants and some very key institutions: namely the Ministry of Food and Agriculture and Ministry of Trade and Industry, the Ministry of Finance and Bank of Ghana.

ADB was established with a focus on agriculture, and was among a group of banks supposed to be developmental in nature.

These include the Bank for Housing and Construction (BHC) for the housing sector, the National Investment Bank (NIB) for industry, and the Cooperative Bank.

Developmental banks mobilise medium to long-term funding to be able to achieve their goals; but there was a missing link, so these banks were rather mobilising short-term funds for medium- to long-term goals.

However, with the passing of time and changes in policy drive, ADB has reverted to its core mandate of agriculture financing and also creating value-chain financing in the sector. It currently contributes the largest funding to agribusiness because it has the structures for funding the industry from the basics to the top.

According to him, prior to 2017 ADB had been making losses because of the way it was structured, but stressed that since new management took over the bank has been making profits year on year and is expected to move even higher. The profitability and outlook of the bank, he said, have really improved – making it a household name once more.

Dr. Mensah admitted there are still challenges in the banking sector, but indicated these are not expected to persist and have a significant impact on the industry. He noted that COVID-19 would have hit the banks very hard if not for the banking sector reforms which witnessed the industry being strengthened. The banks, he said, are strong enough today to withstand the pandemic because they have been strengthened to absorb shocks without bad ramifications.

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