There is a new dawn for the country’s agricultural lending following the approval of the Bank of Ghana for commercial banks to accept guarantees issued by the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) as collateral for loans to the agric sector.
This means that, GIRSAL’s guarantees or backing has now gained the status of an acceptable collateral for agricultural loans.
For decades, agriculture has been described as the backbone of Ghana’s economy but one factor which continued to weigh down the sector was inadequate funding or lending to the sector.
Banks often shy away from lending to farmers and agribusinesses, citing high risks, unpredictable yields, and a lack of reliable collateral. With the new policy of the Bank of Ghana, that narrative may now be on the brink of a major turnaround.
In plain terms, this means that when GIRSAL backs a farmer or agribusiness with its credit guarantee, banks can now treat that support as solid security, much like a landed property or fixed deposit.
This announcement was made by Ismail Adam, Head of Banking Supervision at the Bank of Ghana, speaking on behalf of Governor Dr. Ernest Addison, at a Banking Roundtable organized by the 24-Hour Economy initiative.
A Game-Changer for Farmers and Agribusinesses
This new shift has very significant implications for the agricultural sector and the agribusiness value chain sector. This means smallholder farmers, agro-processors, and agritech companies long locked out of credit can finally walk into a bank with more confidence.
With GIRSAL standing as their guarantor, they are not likely to be dismissed as “too risky” or “too exposed to the weather.” Banks now have the green light to treat GIRSAL’s backing as real collateral.
This could open the floodgates for financing across the agricultural value chain, from seed producers and tractor service providers to food processors and exporters.
“And I’m happy to say that, and I’m sure the banks will be happy to hear that, the Bank of Ghana has granted approval for the guarantee provided by GIRSAL to be accepted as collateral for lending to agribusinesses,” Ismail Adam announced amid applause from the banking community.
Boosting Credibility and Confidence
By this move, the central bank has not only bolstered GIRSAL’s credibility as a credit guarantee provider but also sent a strong signal to financial institutions. This implies that agriculture projects and their agribusiness value chains are now bankable
The Central Bank says this move is part of the efforts to de-risk the agriculture sector and enhance production by directing more credit to the sector.
He confirmed that, “This initiative was aimed at boosting GIRSAL’s credibility as a credit guarantee provider, and make the credit guarantee scheme more appealing for financial institutions to rely on.
This is not expected to be the final guarantee as the Central Bank further announced that the Development Bank Ghana (DBG)’s guarantees will be granted similar collateral status when they start providing backing to agriculture.
“Going forward, when DBG also starts providing guarantees, the same protocol will be extended,” Ismail Adam further revealed.
Impact on Ghana’s Economy
The implications are for this move are huge. Agriculture employs nearly half of Ghana’s workforce and supplies the raw materials for much of its industry. Yet access to credit has been a constant bottleneck.
Unlocking lending could mean higher yields, stronger agribusiness growth, job creation, and even improved food security. In the long run, this could help reduce the country’s heavy food import bill, spur agro-export earnings, and keep more young people interested in farming and agribusiness as viable careers.
Agriculture will always carry risks ranging from weather, pests, and to fluctuating markets. With GIRSAL guarantees now recognized as collateral by the Bank of Ghana, the biggest financial barrier has been lowered.
