BANK OF GHANA LAUNCHES GIRSAL SCHEME

The Governor of the Bank of Ghana (BoG), Dr Abdul-Nashiru Issahaku, has underscored the importance of agriculture and agribusiness as a vehicle for improving Ghana’s foreign exchange earnings, promoting food security and for supporting domestic price stability.

Dr Issahaku said it was the need to exploit the tremendous benefits of the sector that BoG, with technical guidance and support from the Ministry of Food and Agriculture (MOFA) and the Alliance for a Green Revolution in Africa (AGRA), had embarked on a project that will leverage lending for agriculture and agribusiness through a risk-sharing scheme.

The Scheme, he said, was an innovative model of financing, named the ‘Ghana Incentive-Based Risk-Sharing System for Agricultural Lending’ (GIRSAL) that was designed by AGRA, BoG’s technical partner, and successfully implemented by the Central Bank of Nigeria, and in which other countries such as Kenya, Uganda and Liberia have begun to show interest.

Dr Issahaku, who was delivering the key note address at the launch of GIRSAL in Accra, yesterday, explained that under the scheme, BoG would stimulate the desire of banks to finance agriculture and agribusiness in Ghana and that the launch of the scheme presented an opportunity to officially announce and to seek the support of stakeholders to make the initiative a reality and a success.

He noted that even though the agricultural sector accounted for about 22 per cent of Gross Domestic Product (GDP), the sector received an average of only 4.0 per cent of bank lending because of the perception that lending risk was too high to motivate its financing by the private financial sector.

There was, therefore, the need, he said, to scale up financing to the sector, in order to be able to successfully transform agriculture and promote agribusiness in Ghana, hence the intervention of the central bank to facilitate the process of private financial sector financing of the full agricultural value chain.

GIRSAL, Dr Issahaku said, could also be seen as a strategy of diversifying Ghana’s economy away from the over-reliance on oil.

He, therefore, urged operators of private financial institutions to begin to recognize agriculture and agribusiness as viable ventures, and begin to realign their short, medium and long-term strategies to take full advantage of GIRSAL, and optimize their share of expected benefits in the sector.

He also called on the academia to support GIRSAL through research and teaching towards developing innovative methods in agriculture and agribusiness, including improved varieties of seeds, while asking Ghana’s Development Partners to provide both technical and financial support to assist GIRSAL to achieve its set objectives.

Dr Issahaku stressed the need for government to create the necessary infrastructure such as feeder roads and irrigation schemes as well as promote improved seeds to support agriculture and agribusiness in the country.

He commended MOFA’s initiative to establish Farmer Service Centres at strategic locations around the country which, he said, should, among other such initiatives, enhance conditions for GIRSAL to flourish.

He indicated BoG’s intention to collaborate further with a private sector partner, MoFA and other relevant stakeholders to develop a Commodities Exchange Market that would complement the efforts of GIRSAL at the upper end of the agricultural value chain.

In his remarks, a Deputy Minister for Food and Agriculture, Dr Ahmed Yakubu Alhassan, stressed the need for GIRSAL to stand out as a good model for deepening and opening financial access to agribusiness and, in parallel, provide a better understanding of agricultural value chains by financial institutions to invest in.

Dr Alhassan pledged MoFA’s support to GIRSAL with technical expertise and governance.

In an address to launch the initiative, Dr Kwesi Botchwey, Chairman of the National Development Planning Commission (NDPC) and Chairman for the occasion, urged the technical team to deepen their consultations with all stakeholders- banks, farmers associations, agribusinesses, development partners, private investors-in order to ensure that the initiative reflected their concerns and addressed the issues militating against access to finance by the agribusiness sector.

On the other hand, Dr Botchwey urged financial institutions and the agribusiness sector to engage the technical team to ensure that the identified risks were properly mitigated.

Furthermore, he said, there was also the need for financial institutions and the agribusiness sector to expand their capacity to access and manage risks in the entire value chain of agriculture, adding that strenuous efforts and the full collaboration of all stakeholders were required for the success of the GIRSAL initiative.

The target of GIRSAL as a model of financing is to double private sector lending to the agricultural sector from the average 4 per cent to 8 per cent in 5 years or even better.

The model has six pillars that together seek to reduce both the potential and real risks associated with lending to agriculture and agribusiness.

These are a Risk-Sharing Fund, under which the BoG pledges an initial amount of one hundred million cedis seed capital; a Technical Assistance Fund; an Insurance Facility for potential borrowers; a Bank Rating System; Rewarding Systems for banks; and a Digital platform to facilitate quicker and cheaper credit delivery services.

The genesis of GIRSAL can be traced to a workshop organized by BoG in April 2015 to discuss strategies to reduce pressure on Ghana’s foreign reserves by promoting import substitution and the exports of non-traditional products.

One of the key issues identified at the workshop as requiring urgent attention was the need to address access to finance by agribusiness and value chain actors within the agricultural economy, as a result of which BoG and MoFA decided to meet and explore ways of addressing that need, resulting in the GIRSAL initiative.

Source: Government of Ghana