Executive stance

COCOBOD should discontinue contracting seasonal working capital loans for cocoa purchases. A more resilient design is for local banks to provide revolving working capital facilities directly to Licensed Buying Companies (LBCs), with repayments deducted and remitted by COCOBOD to the banks from verified payment entitlements. This can be enforced transparently through a COCOBOD-operated software platform that displays all LBC limits, drawdowns, deliveries, and repayments in near-real-time.

Why does the legacy structure keep breaking

Ghana’s cocoa purchasing system is liquidity-intensive and time-sensitive. When financing is centralised, and COCOBOD bears the working capital risk, any disruption to refinancing, disbursement timing, delivery schedules, or cash management becomes systemic. The consequences are familiar: slow purchases, delayed payments, increased incentives for arbitrage and smuggling, and pressure on COCOBOD’s balance sheet and reputation. The central question is not whether the sector needs working capital—it does—but who should carry it and how repayment should be engineered.

A simple redesign: finance the point of purchase, repay from the off-taker

The point of purchase is the LBC. That is where funds are used, where performance can be measured, and where discipline should attach. Under the proposed model, banks extend revolving facilities directly to LBCs following standardised appraisal and risk grading. COCOBOD does not borrow the working capital; it administers a rules-based repayment waterfall from the LBC’s verified entitlements.

How it works in practice

First, COCOBOD publishes a seasonal financing window and a standardised LBC scorecard. LBCs are graded (e.g., A-D) based on audited financials, historical purchase volumes, operational capacity, governance and compliance, and systems readiness. Second, local banks submit term sheets by grade and are matched with LBCs based on appetite, footprint, disbursement speed, and pricing. Third, banks disburse working capital directly to LBC accounts (preferably controlled accounts with digital payment rails to reduce cash leakage). Fourth, when an LBC delivers cocoa, COCOBOD verifies the quantity and quality, calculates the LBC’s entitlement, and pays the bank, up to the amount due. Any residual is then paid to the LBC.

The digital backbone: one platform for the entire flow

This model only scales with radical transparency. COCOBOD should operate a shared platform—accessible to COCOBOD, banks, LBCs, auditors, and regulators—that provides a single source of truth for LBC registration and grading, facility limits, drawdowns, utilisation tagging, deliveries, entitlements, repayments, arrears, and exceptions. Role-based access controls ensure each stakeholder sees what they need and nothing more. Immutable audit trails, multi-factor authentication, and segregation of duties are non-negotiable.

Do local banks have the capacity?

Bank capacity is not the binding constraint; structure is. Bank of Ghana statistics show the deposit money banking system has a large balance sheet and funding base. Yet, recorded bank credit classified under cocoa marketing is relatively small, suggesting that the current architecture does not provide banks with a sufficiently controlled repayment pathway. A receivables-backed structure with direct settlement from verified COCOBOD entitlements converts cocoa purchasing finance into a product local banks can scale, price, and monitor with far greater confidence.

What COCOBOD does (and does not do)

COCOBOD remains the sector’s orchestrator: licensing, quality assurance, stabilisation, and settlement integrity. However, it does not require working capital loans for LBC purchases. COCOBOD funds its operations from margins and clearly defined statutory resources, while LBCs—supported by bank financing—carry the purchasing working capital. Accountability improves, incentives strengthen, and systemic risk declines.

The call to action

Ghana’s cocoa value chain cannot afford recurring payment disruptions. The proposed model is pragmatic: it mobilises local banks, enforces discipline through direct settlement, and enables real-time monitoring through a shared platform. COCOBOD should convene stakeholders to design the scorecard, draft the tripartite settlement documentation, pilot with a subset of LBCs and banks, and scale based on performance data. The priority is simple: stop centrally borrowing working capital, engineer repayment, and transparency for how the money is used.

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The writer, Dawda Mohammed Hafisdeen, is a private legal practitioner, a Chartered Accountant and a former Bank CFO with experience in credit risk management. he can be contacted via email at hafisdyne@gmail.com