Boss of HFC Bank kicks against proposal to finance agriculture until…
HFC Bank boss Asare Akuffo says banks cannot be forced to “throw money” at agriculture when the problems with financing the sector have not been addressed.
Responding to calls by leading farmer’s organisations for banks to set aside 20 percent of their loan portfolios to agriculture, Mr. Akuffo told B&FT the proposal is not “practicable” under present conditions, as agricultural lending is seen as highly risky by most banks.
“I am not in favour of this proposal. Businesses in general, including banks, respond to rational opportunity in the marketplace. The question that must be asked is: ‘why are banks not supporting agriculture?’ The reason is that the risks involved in supporting agriculture today make it unattractive to banks,” he said.
“Our agriculture is rain-fed, smallholder, with lack of market opportunities and so forth. Those are the issues that must be addressed. We need to have more irrigation schemes, more commercial farms with out-growers. We can still have small-scale farmers, but they can be out-growers around major commercial farms. They can have insurance for crop losses and they can help create marketing boards. Then banks would love to support agriculture.”
Farmer-based organisations (FBOs) in the country recently asked Government to, as a matter of policy, impress upon banks to allocate 20 percent of their loan portfolios to the agricultural sector.
“It should be one of the fundamental rules. I know the banks will grumble for now, but over time they will accept it,” said Edward Kareweh, Deputy General Secretary of the General Agricultural Workers Union (GAWU).
He said a memorandum on the proposal has been sent to the Ministry of Agriculture and endorsed by the Ghana Federation of Agricultural Producers, the Peasant Farmers Association, the Ghana Trade and Livelihoods Coalition as well as Action Aid Ghana, Oxfam and SEND Ghana.
Agriculture is among the sectors that get the least financing from banks, with much of the investment in the sector provided by Government and international donors.
Mr. Akuffo said the first step to solving the problem is to look at the concerns of lenders and address them. “This can be done. If you look at what other countries have achieved, these issues can be addressed.”
He added: “Forcing banks to put 20 percent of their portfolio into agriculture is not even practicable, because banks will still assess the risk before they lend. So a compulsory commitment of funds to agriculture will not work.”
Farmers, like many small-scale business people, consider lack of credit as one of the major barriers to growth as banks do not find the sector attractive enough.
High interest rates have also made going for loans from banks a no-go-area for many smallholder farmers.
Government has recently expanded the Export Development Fund to include agriculture, but smallholders complain that the fund focuses too much on the cash-crop sector to the neglect of those in the food-crop sector.