The Ghana Incentive-Based Risk Sharing for Agricultural Lending (GIRSAL) is to collaborate with the newly established Development Bank Ghana (DBG) which is aimed at improving the funding and capacity-building opportunities for agriculture-based businesses (agribusiness) and agriculture generally in Ghana.

As a non-bank financial institution, GIRSAL, has been at the forefront of de-risking agricultural financing by financing institutions through the issuance of agricultural credit guarantee instruments to enhance the total amount of credit to the agricultural and agribusiness sectors. Currently capitalised with over GH¢200million and US$14million, GIRSAL continues to look for opportunities to improve its support to agriculture and agribusiness including the provision of technical support.

In line with its approach, GIRSAL collaborates with its immediate and direct clients, namely, financial institutions made up of universal banks, savings and loans companies, rural and community banks, and other lenders or investors who demonstrate a desire to work with GIRSAL to improve the support for agricultural lending.

Over the years, GIRSAL has formed partnerships with banks and institutions that are well-placed to offer financial and technical support to their focus sector. With the introduction of DBG, GIRSAL looks forward to a collaboration that would inject much-needed improvement into what it has been doing since its inception. GIRSAL’s collaboration with DBG is structured on three pillars.

  • One is to build the capacity of DBG by providing training programmes that would deliver a greater appreciation of the agricultural sector. GIRSAL has done this over the years to enable banks to access and evaluate agricultural projects.
  • The second is to support DBG’s efforts to assess projects that commercial banks submit to them for funding; to have a better understanding of the risk elements, the technical viability, financial viability, and how such facilities should be structured.
  • The third is that the two institutions are a good fit for participating financial institutions like banks to understand and support the agricultural sector.

Commenting on the collaboration, GIRSAL Chief Executive, Mr. Kwesi Korboe, said: “GIRSAL, as an institution, has a sole objective of ensuring that financial institutions lend to players in the agribusiness sector. The key issues are: always getting funding that is long-term and priced in a very competitive way that makes it possible for agribusinesses to borrow money from the financial institutions for their businesses. What DBG brings to the table which we find very exciting and critical is that they have a pool of funds that is competitively priced and also has a long tenure which allows commercial banks to access and potentially on-lend to agribusinesses. This will ensure that we have a very vibrant agribusiness in this country”.

GIRSAL acknowledges that the agricultural sector or agricultural value chains require a lot of funding and technical support in order to cut across most of the activities along the value chain from production, processing-related activities, marketing haulage and value addition. Through the partnership with DBG, GIRSAL aims to ensure that there is an increased pool of funds and capacity-building opportunities available for agribusinesses to access to improve their businesses.

This will result in more rural employment as most agribusinesses operate in the rural areas usually on production-related activities which typically require more hands. It will also result in increased exports which will generate more foreign exchange for Ghana, and lead to a reduction in the value of food and other agricultural products imported into this country. GIRSAL, therefore, considers the socio-economic benefits of the collaboration with DBG as very attractive for the country as the ultimate impact will be very positive.

GIRSAL is well-placed to support all agricultural value chains and continues to do so through touch points such as input suppliers, producers, aggregators, transporters, warehousing, marketing, and processors/value addition. These have been possible through working with financial institutions and intermediaries to strengthen their institutional capacity to support new lending to agribusinesses in selected value chains, offering participating financial institutions who grant loan facilities to agribusinesses credit risk guarantee cover and facilitating technical support to farmer groups and agribusinesses in the value chains to build their capacity and thereby prepare them to access loan facilities.

DBG will launch on June 14. It is expected to begin making further announcements in the very near future.

Source: Business and Financial Times