BoG launches risk-sharing scheme to boost agricultural lending

 
The Bank of Ghana (BoG) with its stakeholders has launched a value chain financing model to help address challenges to agricultural credit.

Dubbed: 'The Ghana Incentive Based Risk Sharing System for Agricultural Lending (GIRSAL)', it aims to reduce the overall risks in agricultural financing to boost production, productivity and export.

This would increase foreign exchange earnings, support import substitution and promote economic growth and development.

The risk sharing system is BoG's initiative with collaborators such as the Ministry of Food and Agriculture and the Alliance for a Green Revolution in Africa to encourage banks' lending to the agricultural sector,

The model,which has six pillars,seeks to reduce both the potential and real risks associated with lending to agriculture and agribusiness.

Funds would be allocated to the various pillars, including Risk-Sharing Fund,Technical Assistance Fund; Insurance Facility for potential borrowers; Bank Rating System; Rewarding Systems for banks; and Digital Platform to facilitate quicker and cheaper credit delivery services.

The BoG has already pledged an initial GHC100 million as seed capital.

Speaking at the launch, Dr. Abdul-Nashiru Issahaku, the Governor of BoG, said with technical guidance and support from partners, GIRSAL was initiated as a vehicle to leverage lending for agriculture and agribusiness through a risk-sharing scheme.

“Our technical partner, AGRA, designed this innovative model of financing, which has been successfully implemented by the Central Bank of Nigeria; and which other countries such as Kenya,Uganda and Liberia have begun to show interest,” he said.

The Governor said Ghana's agricultural sector accounted for about 22 per cent of the Gross Domestic Product (GDP); however, the sector received an average of 4.0 percent of bank lending.

“If we are to succeed in transforming agriculture and promoting agribusiness in Ghana, then we must scale up financing to the sector,” he said. “Yet, the perception of lending risk is too high to motivate this kind of financing by the private financial sector. This is why the central bank wants to facilitate the process of private financial sector financing of the full agricultural value chain.”

The strategy, Dr. Issahaku said, was one of the ways to diversify the economy away from over reliance on oil and to avoid the 'resource curse'.

“Expanding agricultural production is one sure way of doing this, but it crucially depends on the availability of more financing. It is in this regard that using the value chain approach to financing agriculture constitutes an important innovation, especially in this modern era.”

He said the BoG and its collaborators would continue to build on the efforts made so far.

He said the administrative and operational modalities of GIRSAL would be completed soon and deployed immediately to qualified beneficiaries.

Professor Kwesi Botchwey, the Chairman of the National Development Planning Commission, who launched the Scheme, said there was the need to ensure the sustainability of the initiative as it would go a long way to help in economic growth.

He also stressed the need for the stakeholders of the model to bring on board players in the private sector to ensure the model's success.

GNA