Business

Financing issues in agriculture value chain in Ghana


Agriculture is said to be vital to the development of the nation. It is often touted as the backbone of the Ghana economy.

But a key issue that often comes up is the financing of the entire value chain of the agricultural sector.

Ghana’s agricultural sector comprises of crops, livestock, forestry & logging and fishing subsectors.

The sector’s share of GDP has witnessed some ups and downs declining and currently stands at 21.2%.

Growth

Growth in the entire sector has witnessed an increase from lows of 0.9% in 2014, rising to 2.9% in 2016 and 6.1% in 2017.

The growth in 2017 was driven largely by the cocoa subsector, facilitated by the Planting for Food and Jobs programme.

Now with such potential for growth, why is lending to the sector a challenge?

Has government and the private sector not taken cognizance of the importance of the sector?

Data from the Bank of Ghana has revealed that as at June 2018, the Agriculture, Forest and Fishing sector receives 3.9% of the total credit in the banking industry which translates to about some GHs1.5 billion.

Again, as of June 2018 the proportion of loans gone bad in this sector stood at 33.9% which is perhaps on the high side.

Questions
Perhaps this is the reason why banks are shying away from the Agric sector? Or are there other reasons for the low amount banks lend to the sector?

Does this confirm the notion that lending to the agricultural sector risky?

Currently, the Government plans to establish a national development bank to cater for the financing needs or the Agric sector?

Will that be enough?

What about the financing vehicle launched by the Bank of Ghana in 2016, the Ghana incentive-based risk-sharing system for agricultural lending?

The government in the 2019 budget mentioned that it will operationalize this by providing an amount of GH400 million and an additional $14.0 million from the African Development Bank.

How soon should we see this?

Why is this now being operationalized?

Should this have been implemented before the planting for food and jobs for example?

This lending model brings private sector participation to the agricultural financing chain and has been done in neighbouring countries such as Nigeria.

The role of financing in agriculture cannot be understated.

The only thing that remains is how we can grow the sector from a financing perspective as a result of the massive potential it provides.
 



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