Production, market risks and poor records constrain agricultural lending – GIRSAL

The Ghana Incentive-based Risk-sharing System for Agricultural Lending (GIRSAL) Chief Operating Officer, Samuel Yeboah, has highlighted production challenges, market volatility, and inadequate business records as significant obstacles to financing Ghana’s agricultural sector. Speaking at the Ecobank-JoyBusiness Financial Dialogue Series on Tuesday, September 22, Mr. Yeboah emphasized that agricultural lending involves genuine risks that can hinder farmers' production, earnings, and ability to repay loans.

The perceived risk banks discuss is real, according to him, with production and market uncertainties posing significant threats to farmers. Factors such as inadequate rainfall, crop diseases, and crop failure can negatively impact agricultural output, while market volatility and unpredictable commodity prices further complicate the situation.

Farmers often base their production decisions on expected market conditions, only to face unfavorable prices or difficulties selling their produce in some cases. Inadequate business records also hinder financial assessments, as many agribusinesses, particularly smallholder farms, lack proper documentation of their operations. This information asymmetry makes it difficult for banks to understand the financial performance and creditworthiness of these businesses.

To address these challenges, Mr. Yeboah stressed the importance of clear understanding of risks, proper record-keeping, and GIRSAL's due diligence in assessing agribusiness operations to structure financing that reflects the sector's realities.