UNATTRACTIVE BUSINESS

Although there has been an attempt to use agricultural wealth as a springboard for the country's overall economic development, Ghanaian agricultural output has consistently fallen since the 1960s largely due to lack of access to credit to finance agricultural projects as it has always been a challenge for farmers, most especially those in the small scale farming subsector, Ekow Essabra-Mensah write.

Difficulty in accessing credit has been the topmost constraint restricting the development of the country’s agricultural sector, making it difficult to attract huge number of the country’s youth into the sector.

The sector has as well remained unattractive due to several other factors, among them include the unwillingness of banks to extend credit to the sector, lack of irrigation systems and low use of fertiliser, poor transport facilities linking major food-growing areas and the absence of a ready market for farm produce. 

This assertion is supported by the findings of the various studies undertaken by the Association of Ghana Industries Business Barometer (AGI BB), a sector studies, which have identified difficulty in accessing credit, high cost of credit and lack of medium to long-term capital as the leading barriers to growth of the agricultural sector. 

The agriculture sector has been a source of worry for policymakers in recent times due to a growth slowdown since 2010. In the first quarter of 2014, however, the sector expanded at an annual rate of more than 12 percent as crops and livestock production improved significantly.

A large proportion of the country’s active working population is engaged in the sector, mainly in the cultivation of the major cash crop cocoa as well as tubers, vegetables and oil palm.

In identifying the need to address these challenges, the Ghana Agricultural Producers and Trader’s Organisation, (GAPTO), the leading advocate in the agriculture subsector intend to advocate to get commitment of key stakeholders to develop and implement policies that will help improve access to funding to operators in the agricultural sector.    

Speaking at a stakeholder workshop in Accra organised by GAPTO in collaboration with Business Sector Advocacy Challenge, (BUSAC) fund was under the theme: ‘how to improve access to funding to operators in the agricultural sector.’

Participants at the workshop were drawn from representatives and leaders of small holder farmer groups nationwide as well as government and relevant Ministries, Department And Agencies (MDAs) to discuss policy recommendations, and agreement reached on the way forward to remove barriers to access to funding of agriculture activities.

The objectives of the training programme among others was to equip and support members of GAPTO in effective advocacy skills to enable them influence the policy and action of those in the public sector (Government Ministries, Departments and Agencies) members of GAPTO will have a better understanding of business sector advocacy, the processes involved in influencing decision making and its implications for the associations.

It was also targeted at persuading the government and other relevant MDAs to develop and implement policies that will help to remove barriers to access funding in the agricultural sector, as well as to collaborate with policymakers and insurance companies to come out with insurance policies for the agricultural sector into reduce risks associated with the sector.

GAPTO as well will intend to sensitise financial institutions to come out with innovative products to enhance credit to the sector.   

Alhaji Haruna Agesheka, the Secretary General of the GAPTO proposed that financial institutions should collaborate with government to find out how some of this risks can be minimized and mitigated, as this will make lending to farmers in particular more attractive to the various banks within the country. Financial products should be designed specifically for those within the agricultural sector. 

He explained that farmer based organisations such as GAPTO should be formed in the various farming communities to enable them to become more credit worthy and presentable to the financial institutions which will position the cost of borrowing funds to be cheaper for the farmers.

“The formation of a credit union by GAPTO members may be a step in the right direction. A typical example of well structured credit union is that of credit agricole which has it’s head quarters in France,” he said.

The agriculture sector employs about 60 percent direct and indirectly of the total work force in the country and about 25%  to the country's gross domestic products (GDP), the sector also provides the bulk of raw materials to industry, and it is the main sector that can guarrantee the country's food security.

Challenges

Beginning with the drop in commodity prices in the late 1960s, farmers have been faced with fewer incentives to produce as well as with a general deterioration of necessary infrastructure and services.

Farmers have also had to deal with increasingly expensive inputs, such as fertilizer, because of overvaluation of the cedi. 

Food production has fallen as well, with a decline in the food self-sufficiency ratio from 83 percent in 1961-66 to 71 percent in 1978-80, coupled with a four-fold increase in food imports in the decade prior to 1982. 

By 1983, when drought hit the region, food shortages were widespread, and export crop production reached an all-time low. 

Accessing funding to finance agricultural projects in the country has always been a challenge for farmers, most especially those in the small scale farming. 

The Agricultural Development Bank, the traditional provider of finance to agriculture but now a full-fledged, full-services commercial bank, is still the most permanent lender. 

As at June 30, 2010; the bank had a gross outstanding agricultural sector loan portfolio of GH¢113.49 million. Instructively, however, only GH¢86.097 million or 75.86% was performing credit while the other GH¢27.396 million, or 24.14% was non-performing. 

This evidences the complaint by banks that the loan recovery rate on loans to agriculture is inordinately low, reflecting the relatively high risk involved in lending to the sector.

Nevertheless several other banks, notably Ghana Commercial Bank (GCB) and Stanbic Bank have also built significantly large agricultural credit portfolios. 

Now ADB has developed an agricultural finance policy and an integrated agricultural financing framework which may serve as a model for banks to successfully lend to the agricultural sector. 

These aim to enhance the timeliness, efficiency and effectiveness of agricultural credit delivery and recovery; minimize the misapplication of agricultural credit by beneficiaries since they have little access to cash; reduce the transaction cost of credit administration; ensure timely provision, procurement and delivery of agricultural inputs and services; and ensure the synchronization of agricultural production with processing and marketing and importantly, integrate the bank’s efforts with current initiatives by government in the broader agricultural sector.

Indeed this last stated objective is the foundation on which ADB and Ministry of Food and Agriculture have agreed on an extensive partnership. 

The collaboration aims at leveraging the expertise of both institutions for effective and efficient delivery of agricultural finance, jointly identifying priority areas of agricultural financing in accordance with government policy and assessing the feasibility and viability of agricultural projects requiring financing. 

It also will determine how to assess and mitigate the risks associated with agricultural lending; deepen institutional understanding of the dynamics of the agricultural sector and ultimately ensure the sustainability of various government agricultural initiatives.

Members are farmers, traders in agriculture produce and agro food processors. They are mostly informal businesses and sole ownership and use the association address as their location. 

Available information gathered indicates that although the ADB and some multi natinational banks have all made tremendous effort to provide funding to peasant farmers, there still needs to be available more funding opportunities for actors within the agric sector. 

As the economy grows and evolves, measures should be taken to ensure that funding is readily accessible and affordable for stakeholders in agricultural sector. 

There is no doubt that agriculture plays a pivotal role in Ghana’s economic set up. Government and several stake holders have played significant roles since independence and at this pivotal stage of the country’s developmental dispensation al lot more need to be done to ensure food security and strong growth for the sector.