Banks’ appetite for agric financing stays at paltry 4%
Data from the Development Bank Ghana (DBG) indicate that support of universal banks toward agribusiness finance remains insignificantly low at 4 percent.
This, according to the Bank, calls for action and maximum desire for financial institutions to intervene in agriculture value chain financing in order to position the sector to thrive.
Speaking to the B&FT at a capacity building workshop to enable financing from financial institutions for SMEs in the agriculture value chain, Deputy CEO-DBG, Michael Mensah-Baah, said the percentage of financing for the sector by banks, which is currently at 4 percent, is a worrying one.
The workshop was organised by the DBG and the Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL).
Mr. Mensah-Baah however said banks are not to blame because most do not have access to long-term funds to finance the sector.
“If you do not have the resources, it is very difficult to make commitment into the sector. Secondly, lack of understanding risks in the agricultural sector is making most banks shy away from making investments in the sector,” he said.
He explained it is important that financial institutions have a clear understanding of the agribusiness value chain, adding: “Only when conscious efforts are made at understanding agribusiness will giant strides be made in de-risking agri-business lending”.
Access to long-term finance schemes and risk management, Mr. Mensah-Baah said, must be addressed in order to rectify the issues associated with agribusiness finance across the value chains.
The DBG, he revealed, is finalising processes to commit up to 60 percent of long-term funds into agriculture to make sure the sector thrives.
“That is the main role of the DBG. We are established to uplift and support SMEs in any sector to thrive. Our goal is to act as an enabler for businesses in Ghana and as a long-term capital provider in the market,” he added.
The DBG and GIRSAL programme is designed to enhance financial institutions’ agricultural knowledge; improve their capacity to assess agricultural loan applications; and structure and manage agribusiness lending.
In the first phase of the programme, which was held between August 2020 and September 2021, a total cohort of 262 mid-level staff from 24 financial institutions participated.
The positive feedback received from participants in the programme has indicated that the course has been effective in demystifying the agriculture sector, and the prevailing perception that the agriculture sector is ‘high-risk’.