Unfavourable loan conditions, a bane to the Agric sector – Financial Analyst

President of the Ghana Savings and Loans Association, Kwaku Duah Berchie has bemoaned the unfavourable terms of loan payment given to those in the Agricultural sector especially farmers by financial institutions.

According to him, because financial institutions expect montly loan repayment, most farmers are not able to pay up and therefore default because the maturity period of their crops does not match the expected payment structure.

This in the view of Mr Berchie has made some financial institution to refrain from giving loans to farmers.

Meanwhile, In September 2018, Ghana’s President, Akufo-Addo announced that the agricultural sector will receive a big boost following the government’s decision to establish a GH¢500 million facility to support the growth and development of the sector.

Known as the Ghana Incentive Based Risk Sharing Agricultural Lending Scheme, the President said the facility, which would be managed by the Bank of Ghana, was targeted at reducing risks of investments and promoting agriculture financing.

However, speaking in an exclusive interview with Ghanatalksbusiness.com,  President of the Ghana Savings and Loans Association, Kwaku Duah Berchie advanced that the one best and lasting solution for the unfavorable agricultural finance in Ghana is for financial institutions to consider giving loans to farmers with insurance.

To him, combining agricultural insurance with the credit facility  will cushion the finance institutions against some of the prominent risk we know of.  Banks will  be in a better position to recover their money in the event of bushfire, flood or drought.

Agriculture Insurance will also serve as some sort of insurance for the commercial banks to give out loans at reasonable rates to farmers.

Ghanatalksbusiness Analyst opinion

Ghanatalksbusiness Analyst suggests adds to the afore mentioned the need for government to strengthen policy frame work for the Agric production and marketing.

Below are few of the numerous ways the government can create an enabling evironment to enhance private financing;

 Lack of Ready market for farmers

The lack of a ready market for farm produce, especially perishable goods is leading to higher credit default amongst farmers. Ghanatalksbusiness analyst is of the view that the Ghana Commodity Exchange, GCX has come at the right time to help farmers clear their produce on time, currently the Commodity exchange gives maize farmers 70% of their quantity of maize deposited in the GCX warehouse.

ALSO READ: Ghana Commodity Exchange (GCX) – How it Works

However, analyst the managers of the Ghana Commodity Exchange should make it point to go down to the farmers in major farming communities and explain how the Commodity Exchange real works.

Poor Roads impede the timely transportation of farm produce

Inaccessible roads in some major farming community in Ghana have led to several losses as most perishable goods like tomatoes are left to rot on the farm. This is another cause of credit defaulting on the part of the farmers. If strong policies are enacted to ensure farm produce ready for sale get to the market on time it will go a long way to help farmers re-pay their loan after selling.

In efffect,  financial institutions will be more certain if there is an assurance the farmer can sell his produce and repay the loan on time.