Lending to the Ghanaian agricultural sector by financial institutions has traditionally been seen as unattractive. Agriculture receives around 4% of banks loans compared to its high contribution to GDP and employment and potential for driving economic transformation. This has been largely attributed to the high risk associated with the sector, among other reasons. Development Bank Ghana (DBG) in partnership with Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL) seeks to correct this. GIRSAL’s agricultural credit risk guarantee and technical assistance have been introduced to stimulate more investment into the agricultural sector.
The DBG and GIRSAL program 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 program 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 on the program has indicated that the course has been effective in demystifying the agriculture sector and the prevailing perception that the agriculture sector is “high risk”.
Development Bank Ghana (DBG) and GIRSAL are co-funding a second phase which involves three (3) additional training cohorts from August to December 2022. Training sessions began with 55 participants from 12 financial institutions at the National Banking College on 9th August. The two-module course covers Ghana’s agribusiness environment, value chains, agriculture insurance, and agricultural loan appraisal techniques. It is targeted at agriculture desk officers, relationship managers, credit risk officers, and credit analysts. The course also includes a practical field visit.
DBG is a critical partner for GIRSAL with the former, set up to provide long-term wholesale financing, credit guarantees, and business development services to increase overall lending to priority sectors, including agriculture. GIRSAL provides technical support to assess agricultural loan applications submitted to DBG, support applicant PFIs to identify risks, structure financing opportunities, and issue credit guarantees.
Michael Mensah – Baah, Deputy CEO of DBG mentioned it was important that financial institutions had a clear understanding of the value chain of agribusiness. He emphasized that only when conscious effort is made at understanding agribusiness is when giant strides will be made in de-risking agri-business lending.
The MOU between DBG and GIRSAL was signed in March 2022. Both organizations will collaborate to provide capacity-building and innovative interventions to improve agriculture financing in Ghana.