The role of the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) is to help accelerate financing and interconnectedness of the agricultural sector to ensure that it is functioning at optimal levels across its key components.
GIRSAL is also guided by the country’s food and Agriculture Sector Development Policy (FASDEP) and it’s therefore gratifying to learn from the Managing Director of the Agriculture Development Bank (ADB), Dr. John Kofi Mensah, that the establishment of key institutions like the GIRSAL has helped the bank to invest more in the agricultural 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.
The ADB MD is of the conviction that the majority of banks have failed to offer portfolios for agriculture activities because of the potential to record major post-harvest losses, which is reckoned at some 40-45%; thereby making lending to the sector risky.
He stated that with such a guarantee, the bank has introduced complete value-chain funding of all categories in agriculture, and also that the initiative is financing various aspects like over-production and lack of storage infrastructure to address these challenges permanently.
Indeed, it is rather fulfilling that ADB has reverted to its core mandate of financing agribusiness, turning away from what it used to do in the past. ADB was established with a focus on agriculture, and was among a group of banks supposed to be developmental in nature.
It currently contributes the largest funding to agribusiness because it has the structures for funding the industry from the basics to the top. It is instructive to note that prior to 2017, ADB had been making losses because of the way it was structured.
With the new management in place, the bank has been making profits year on year and is expected to move even higher. This should be a good omen for the country’s agricultural sector, since it continues to be the backbone of our economy.
Access to credit has long been a hindrance for the agricultural sector because of its perceived risky nature; however, with institutions like GIRSAL in place agricultural lending will be enhanced and the sector can play its expected towering role in transforming the economy.