Banks still not on good terms with agric sector as credit to sector remains low

Business News of Thursday, 12 September 2019



Banks reportedly still see the agric sector in an unfavourable light

For years, what is touted as the backbone of the country’s economy – the agriculture sector – has been among the sectors that receive the least assistance from financial institutions, as the sector has been branded a high-risk one.

The recent Banking Sector Report published by the Bank of Ghana (BoG) has shown that banks still see the sector in an unfavourable light, as the share of banks’ credit that went to the sector was just a measly 4.5 percent – compared to the commerce and finance sector, which received the highest share of 22.9 percent of total credit as at end-June 2019, followed by the services sector with a share of 22.1 percent.

In fact, from the report, the three highest sectoral recipients (commerce and finance, services and manufacturing) had a combined share of 56.6 percent of the banking sector credits, while the lowest three recipients (mining and quarrying, agriculture, and construction) accounted for 16 percent, confirming that the agriculture sector remains unattractive to banks.

Commenting on how this stigma on the sector can be removed, agriculture expert at the Crop Science Department of the University of Ghana, Prof. Ofosu Budu, said there is need for a common platform to link banks, agri-businesses and other research institutions – which will exchange information about the entire agriculture value chain and come out with the best financial model to help the sector.

“Apart from cocoa, where the value chain factors know each other, none of the agricultural products have got such a platform. So, if we want to attract investors whereby banks will be ready to fund, there should be a common platform where the banks, businesses and other research institutions can do a project for about three years; then they can learn along the value chain and replicate the success in other areas, otherwise it will be the same old story,” he said in an interview with the B&FT.

He further stated that government should play the role of a facilitator, whereby it will take the lead in discussing with embassies how to gain access to foreign markets.

“Government’s role is to facilitate and guarantee, to some extent, but not to come in as a player. It can get the foreign embassies to link businesses to the market over there; give them the specifications to entering the market and facilitate travel there,” he said.

The country’s agriculture sector has not shown any significant progress despite government intervening with the Planting for Food and Jobs (PFJ) programme in 2017, which has seen the export of maize to three neighbouring countries – Burkina Faso, Ivory Coast, and Togo – resumed.

The quarterly GDP figures from the Ghana Statistical Service (GSS) show that the sector’s growth has dipped since it increased to 5.5 percent in the third quarter of 2018 from 4.8 percent the previous one.

Growth declined to 4.4 percent in the last quarter of 2018, and dropped further by half to 2.2 percent in the first quarter of 2019.