The West Africa Regional Head of Alliance for Green Revolution in Africa (AGRA) is advocating for more innovative models of agricultural financing in the country.
Forster Boateng says that is the only way banks will be encouraged to increase funding for the agricultural sector, so farmers can get increased access to credit.
Speaking in an interview with Joy Business’ Emma Davies on the Food Chain show, he expressed concern currently, only about 4 per cent of finance from banks go to the agricultural sector.
This is despite the fact that the sector is responsible for about one-fifth of the country’s gross domestic products (GDP) and employs almost half of the workforce.
“Farmers are fragmented, and so transactional cost is so high. That is why they (banks) find it difficult to loan money to producers. But they want models where they can support smallholder farmers through aggregators and processors. And that is what AGRA is trying to do,” he explained.
He says AGRA is currently rolling out about 3 different models of agriculture financing to support farmers, including mobilising farmer groups so processors along the value chain support them.
“We are trying to mobilise smallholder farmers and strengthen the supply chain of processors like Premier Foods. You aggregate a number of farmers around him. Then you give the farmers training to respect forward contracts,” he explained.
“And so, he will use his forward contracts, go to the banks, and the banks respect him, and know that he will pay. So, he takes the money and then finances the smallholder farmers, their inputs, fertiliser, whatever they need. So, they produce for him, he takes away the cost of inputs and pays back to the bank,” Mr Boateng explained.
He says AGRA is also investing in a risk-sharing model of agricultural finance. “There is also the risk-sharing model that we have. Where we bring an input dealer, an aggregator, then farmers, and then there is a cost-sharing model here,” he explained.
“The farmer will try to pay one-third of the cost. The bank will make sure they are supplied with the inputs. Then the aggregator and the other partners in the value chain hold the rest of the risk so that they chase the farmers, supply the inputs, then they pay back. Because banks cannot galivant across every little village and start demanding that farmers pay. It’s a difficult task… so you need to buy down the risk for the banks,” he added.
Mr Boateng commended government for instituting the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) Project, where government gives banks guarantees to encourage them to invest in agriculture.
Planting for Food and Jobs Initiative
The AGRA West Africa boss hailed successes chalked so far by government’s Planting for Food and Jobs Initiative, noting, “we’ve seen some progress and some challenges.”
“The progress is that farmers are realizing that the use of improved seeds can help them increase their productivity. And they are using it. Before the programme, only about 20% of farmers were using improved seeds. Now they can see that using improved seeds, their yields have gone up significantly,” he observed.
“If you want to increase productivity, it’s about 30% planting material, 30% soil and 30% extension services. The rest of the 10%, it’s up to God. That is how you can improve yield. Farmers are learning how to use these things,” he explained.
The AGRA boss noted Ghana is gradually making progress when it comes to fertiliser usage requirements recommended by the Economic Community for West Africa States (ECOWAS).
“ECOWAS had said that every country should hit 50kg of fertiliser per hectare. Ghana was around 12kg per hectare… Over time, with these flagships, we are around 25 – 28. Which is commendable but we think we can do higher,” Mr Boateng said.
He assured AGRA will continue to support farmers even as the Covid-19 pandemic negatively impacts food security. “We have contributed to supporting farmers through COVID. We are investing in digitization. Face to face extension didn’t work because of the pandemic. So, we used a lot of digitization. We supported organizations to send information to farmers,” he explained.
“We look at improved seeds, market and extension… We bring a consortium of partners together to service the smallholder farmers… That’s what we did,” he explained.
Acting Country Manager of AGRA Ghana Bashiru Musah Dokurugu who also spoke on the Food Chain show said AGRA currently supports thousands of farmers across the country.
“We have selected 5 commodity value chains we are supporting. Rice, cassava, soya bean, maize and cowpea. These are the commodity value chains we are supporting for strategic reasons for the farmers to increase their productivity,” he said.
“We are in the business of supporting the government of Ghana to drive its own agenda. So, a lot of what we do is to support government’s vision for agriculture. So, we have supported the research institutions for them to shape Ghana’s agricultural sector,” Mr. Dokurugu added.
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