GIRSAL will further contribute to reduce the risks of agricultural loans – ADB MD
The Managing Director of the Agricultural Development Bank PLC, Dr. John Kofi Mensah hailed the introduction of the Ghana Agricultural Lending Incentive Risk Sharing (GIRSAL) scheme as a major change for agricultural lending in the country.
According to Dr. Kofi Mensah, the introduction of GIRSAL into the agricultural lending space will further reduce sector risk and make commercial banks more comfortable, who have until now been afraid to venture into agricultural finance to lend to the sector. .
“As the leading commercial bank for agricultural lending in the country, the introduction of GIRSAL into the agricultural lending space will positively impact lending in the sector,”
I would like to commend the government, Bank of Ghana and all other stakeholders for this wonderful initiative to reduce agricultural lending risk in the country,” he said.
Speaking at the relaunch of GIRSAL at the Kempinski Gold Coast Hotel in Accra under the theme “Relaunching the GIRSAL program and launching a public-private partnership platform for agribusiness”, Dr Kofi Mensah said said customers in value farming have been limited in their access to credit due to the lack of collateral, credit history and reliable financial accounts that would help financial institutions better assess their creditworthiness.
According to him, the impact of GIRSAL has been monumental during these few years of operation and has alleviated the constraints and bottlenecks related to the granting of credit to customers in the sector by absorbing part of the risk of bank failure. commercial.
“GIRSAL has provided commercial banks with an appreciable level of comfort to encourage them to increase the supply of credit to actors in the agricultural sector in credit difficulty.
“We at ADB are pleased to see that the start of operations of GIRSAL has boosted competition in agricultural lending in Ghana. While the Agricultural Development Bank remains the main player in agricultural credit, in recent years we have seen interest from other commercial banks in lending to the sector. He said.
Dr. John Kofi Mensah hoped that the renewed enthusiasm observed in some commercial banks to lend to the agricultural sector, hitherto considered very risky, is supported by GIRSAL’s risk-sharing activities which have enabled commercial banks to broaden their appetite for agricultural and agri-food risk. allied projects.
He further indicated that a major additional feature of GIRSAL that will further help the agricultural sector is likely its ability to negotiate better loan terms such as lower interest rates, longer loan terms and loan requirements. lighter warranty.
“They have always argued that once their interventions reduce lending risk, it is important that clients benefit from the reduced risk profiles,” he said.
The AfDB Managing Director hoped that GIRSAL’s operations would be financially viable in the long run not to allow them to properly play their role in the agricultural lending space.
He further urged actors in the agricultural value chain, especially the clients who are the ultimate beneficiaries of the credit risk guarantees provided by GIRSAL, not to waive their loan repayment obligations in order not to materialize the greater fear associated with these credit risk guarantee schemes.
Dr. Kofi Mensah also urged commercial banks not to let credit risk guarantee by GIRSAL affect the effective assessment, monitoring and recovery of loans and, more importantly, not to consider credit risk guarantee credit of GIRSAL as an absolute substitute for the guarantee. These, if carried out, will ensure the sustainability of GIRSAL’s operations, which we so badly need.
He indicated that the AfDB and other partner financial institutions stand ready to work with GIRSAL to consolidate the gains made even as they prioritize selected agricultural value chains to achieve import substitution and development objectives. ‘export.
Since the start of its operations in July 2019 until June 24, 2022, GIRSAL has provided credit risk guarantees for a total amount of approximately ¢301.30 million covering loans for a total amount of 629.60 million¢ granted by Ghanaian commercial banks to actors in the agricultural value chain and the Agricultural Development Bank PLC remains the largest partner financial institution.