Despite the notable strides made in Ghana’s agricultural sector, participants in the value chain continue to grapple with serious challenges in accessing finance, Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has revealed. High interest rates on loans, driven by a perception of risk, and stringent collateral requirements are stifling progress.
The Governor highlighted that the situation is compounded by external risks, such as climate variability and market fluctuations, which further hinder the ability of agricultural actors to access credit and repay loans.
Speaking at the Ghana Incentive-Based Risk Sharing System for Agricultural Lending’s (GIRSAL) 5th Anniversary Launch and Rubber Value Chain Conference on September 17, Dr. Addison emphasized the need for innovative financial solutions to address these challenges.
He proposed expanding financing models and utilizing digital platforms to provide more inclusive and adaptive financial services for the sector. Specifically, leveraging mobile banking technologies and developing insurance products that cater to crop failure and adverse weather conditions are seen as crucial steps forward.
Dr. Addison stressed that agriculture remains critical to Ghana’s economy, contributing around 24 percent to the GDP and employing approximately 40 percent of the workforce. However, food price fluctuations, compounded by inflation, are a major concern. With food items accounting for 43.7 percent of the consumer basket, the sector’s performance has a significant impact on headline inflation.
He also pointed out the pressing need for local food production to reduce the country’s food import bill, which averages US$1.4 billion annually.
As part of its broader strategy to de-risk agricultural lending, the Bank of Ghana helped establish GIRSAL to incentivize banks to lend to the agricultural sector. Since its inception, GIRSAL has issued over GH¢604.53 million in credit guarantees to 17 financial institutions, covering up to 70 percent of credit default risks.
This initiative has resulted in GH¢1.18 billion worth of loans extended to agribusinesses across 72 districts, positively impacting the agricultural landscape.
One of GIRSAL’s standout achievements has been its intervention in the rubber sector, where it facilitated local participation by mitigating perceived risks and encouraging indigenous processors. This initiative has generated substantial employment, providing around GH¢3.5 million annually to rural households and contributing US$8 million in export proceeds.
GIRSAL’s broader impact is further evidenced by its technical and advisory services, which have been instrumental in enhancing the capacity of financial institutions to handle agricultural portfolios.
