Business News of Monday, 2 March 2015
USAID-Financing Ghanaian Agriculture Project (USAID-FinGAP) has reserved an amount of $500,000 as grant to Eximguaranty Company Ghana Limited (Exim Ghana) to subsidize the cost of credit guarantee premiums on loans from financial institutions to agribusinesses in the rice, maize and soy value chains.
The fund will serve as collateral substitute to help agribusinesses secure financing while reducing the risk for the financial institutions. The two organizations have signed an agreement to this effect.
With this agreement, USAID-FinGAP and Exim Ghana have reduced the credit guarantee premium from 5.5% to 4.5% for agribusinesses in the project’s value chains.
Eximguaranty guarantees up to 75% on the loan amount approved by the financial institution. USAID-FinGAP’s grant will be used to pay half of the credit guarantee premium required by the financial institutions.
“We are happy to work with Eximguaranty to achieve the twin objectives of facilitating financing for agribusinesses by reducing financial institutions’ risk while making it less costly for agribusinesses to get financing” said Rick Dvorin, USAID-FinGAP’s Chief of Party.
“This project has come at an opportune time to support agricultural growth and development in Ghana geared towards reducing poverty and improving livelihoods in the three Northern regions, and it is in tandem with the call by the President to grow most of the food stuff we eat, improve food security and as well increase our exports. We at Eximguaranty are excited to be part of the collaboration with USAID-FinGAP as it offers a platform to realize our mission of ensuring the flow of credit from financial institutions to SMEs especially in the agricultural sector through credit guarantees” stated Zac Bentum, Managing Director of Eximguaranty Company Ghana Ltd.
To access this grant, a financial institution making a loan to an agribusiness in the rice, maize and soy value chain, will submit the loan application to Eximguaranty for consideration.
Once Eximguaranty agrees to cover the transaction, the financial institution will either bear the 50% cost of the premium or share with the agribusiness.
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 raw materials from northern Ghana.
The project is building the capacity of its network of business advisory service (BAS) 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 financing their needs. Since its inception in July 2013, the project has facilitated over $9.5 million in financing for agribusinesses in the target areas, with much more in the pipeline through the project’s network of BAS providers.
Eximguaranty Company Ghana Limited’s mission is to facilitate the flow of credit to SMEs by providing credit guarantees and general financial risk management solutions using innovative instruments.
This includes assisting banks and non-banking financial institution to extend credit facilities to borrowers who may have inadequate or no collateral as well as providing mechanism through which agriculture products, can be financed and marketed.