The Agriculture Development Bank (ADB), the leading financier of agricultural activities in the country, says it will pass on the benefits of falling interest rates to its core captive market, agriculture. Although the bank ceased to be a financier of the agricultural sector in 2004 when the Bank of Ghana enforced universal banking, it has remained committed to the sector which has been largely neglected by financial institutions in the country. Officials of the bank told the Graphic Business in an exclusive interview that the worse risk borrower in the agricultural sector paid the base rate as interest, thus by extension, farmers and other players in the agricultural value chain would be paying anything up to 20 per cent as their cost of borrowing effective this month. They said agriculture continued to attract the lowest average interest rates despite the inherent high risk associated with the sector. This discriminatory pricing policy of the bank in favour of agriculture is expected to continue with borrowers in the sector with the obvious beneficiaries of lower rates as the base rate of the ADB declines. Traditional economic theory generally matches higher risk with higher interest rates. The Policy and Strategy Implementation Coordinator, Dr Henry Shirazu Alhassan, and the Head of Corporate and Specialised Credits, Mr. Robert Karikari Dorko, jointly told the paper that in spite of the numerous challenges confronting the sector that made financing it sticky, ADB was determined to grow its agric portfolio to about 40 per cent of its total lending portfolio in the next couple of years. “We lend across all types of farming and produce, regardless of the scale and amount. When it comes to agric, we don’t have a restricted appetite,” Mr. Dorko stated. The financing of majority of agricultural activity in the country is linked to ADB, which lends to the smallest player in the value chain to the largest, including peasant farmers, livestock farmers, poultry farmers, as well as those who cultivate maize, cocoa and cashew. In spite of these assurances and the palpable increased devotion of funding to agriculture by the bank, which has its branches spread across the country, agricultural sector players still listed ‘access to credit’ as the second top challenge in the Business Barometer survey conducted by the Association of Ghana Industries (AGI). The President of the AGI, Nana Owusu Afari, therefore, said if the country placed so much premium on agriculture, it should direct more financing into the sector, which employs many Ghanaians. But records show that last year ADB’s lending to its core agricultural sector reached GH¢ 174.2 million from GH¢105.3 million in 2009, an increase of 64.5 per cent. This means that the share of agriculture in the bank’s credit portfolio increased from 24.1 per cent in 2009 to 28.9 per cent in 2010. The almost 30 per cent ADB agric portfolio, according to industry statistics, is equivalent to about 80 per cent of the total banking industry portfolio devoted to agriculture. It is worth noting that the industry data on agricultural financing by some other banks include a gamut of activities such as financing the importation of fertiliser that would rather pass as trade finance in the books of ADB. Dr Alhassan explained that the bank had, since its inception in 1965, been enjoying some level of medium term to long term financing support from the government to enable it to continue its financial intermediation in the risky agricultural sector. However, the conversion from a development bank to a universal bank in 2004 which came about because of the government’s inability over the last few years to provide such financing had hindered the bank’s ability to offer the medium to long term financing that the agricultural sector so badly needs. Source: Graphic Business