USAID-FinGAP Builds Capacity Of Finance And Business Advisory Service Experts On Financing Agribusinesses

As of September 2014, the USAID-Financing Ghanaian Agriculture Project (USAID-FinGAP) has trained 64 participants from financial institutions and business advisory service providers on financial analysis and the use of cash flows to facilitate financing for agribusinesses in rice, maize and soy value chains in Ghana.

Agribusinesses in Ghana face various difficulties securing loans to operate, such as large collateral requirements, high interest rates and short term loans. To address some of these challenges, USAID-FinGAP trained personnel from financial institutions, including commercial, rural and community banks and business advisory service (BAS) providers, to better use cash flow-based financing along with traditional collateral-based financing for agribusinesses.

Collateral-based financing requires borrowers to secure loans with assets (usually landed property) of higher value than the loan they need and poses a challenge for small agribusinesses. Cash flow financing on the other hand considers future cash flows from the business as assets and, based on financial analyses, are able to back the loans with the expected cash flow from the business operations.

Cash flow financing is critical for agribusinesses since, unlike other sectors, loan repayments usually begin several months after financing is given to the agribusiness and the repayment period is tied to the seasonal cycles.

Augusta Nyamadi-Clottey, of the Ghana Grains Council, a BAS provider said “The training has given me the opportunity to enhance my knowledge on the determination of cost drivers for agribusinesses. I can now better help our clients - smallholders, aggregators and warehouse operators - conduct realistic financial analyses and develop sellable business plans to meet financial institution requirements.”

Agric Project Manager for Upper East and Upper West regions of Agricultural Development Bank, Francis Decker said “I will take a new look at agribusiness financing requests going forward. I have learned new approaches in loan appraisals which I will incorporate into my work.”

Rick Dvorin, USAID-FinGap Chief of Party, opening the training said “Agribusinesses are profitable, yet financial institutions need to understand their specific operations and needs to be able to provide them financing. Successful agribusiness-financing leads to benefits for all: the financial institution, BAS providers, the agribusiness, and the general public as food security is improved and poverty is reduced.”

USAID-FinGAP is a five-year project that is unlocking financing for agribusinesses in the rice, maize and soy value chains based in or sourcing from northern Ghana. The project is increasing the expertise of its network of business advisory service providers in identifying, preparing and packaging financing proposals for viable agribusiness opportunities. It is also using a combination of incentives and technical assistance to help financial institutions better understand agribusinesses and develop products tailored to the special financing needs of agribusinesses. Since its inception in July 2013, the project has facilitated over $4 million in financing for agribusinesses in the target area.

For further details, contact: Rick Dvorin |Chief of Party|+233 (0) 302 245 998| [email protected]