Over the years, farmers have long lamented and suffered as a result of a lack of financial assistance from various financial institutions in the form of loans or credit.
The lack of support has failed to develop the economy by boosting the agriculture value chain and sustaining jobs. Commercial banks, rural banks, Savings and Loans Companies, and Microfinance Institutions are among the financial sector entities active in agricultural financing in Ghana.
This has led to calls from stakeholders and the Ministry of Agriculture to help farmers in acquiring loans. The main problem faced by smallholder farmers in obtaining loans is the mistrust between smallholder farmers and banks. Long waits in obtaining any cash are common due to, a lack of collateral, a large sum of saved capital, and a high-interest rate for farm loans.
As a response to helping farmers, the Government of Ghana launched Ghana Incentive-Based Risk-Sharing System for Agricultural Lending(GIRSAL) a limited liability company with the Ministry of Finance holding 100% shares on behalf of the Government of Ghana. This is aimed at enhancing agriculture financing and sector transformation through increased capital inflows into critical value chains.
GIRSAL is a nonbanking institution established to de-risk agricultural financing and stimulate increased lending to the agriculture sector by financial institutions in Ghana. GIRSAL issues agricultural credit guarantee instruments to enhance the total amount of credit to the agricultural and agribusiness sectors.
After a cursory look at the newly established GIRSAL, the institution offers agricultural packages to farmers such as Credit Risk Guarantee (an indirect loan package for agribusiness) that provides participating financial institutions with up to 70% credit risk guarantee on agricultural loans. Another package is the Interest Rate Subsidy Initiative (IRS) which seeks to grant a 50% subsidy on financial institutions’ interest charges for loans advanced to qualified agribusinesses in selected value chains and activities. IRS focuses on
- Rice and Soya
- Poultry (Broiler production)
- Tomato production and processing
To have a wide array of packages for farmers, GIRSAL has also partnered with Development Bank Ghana (DBG), National Banking College (NBC), ARB Apex Bank, Ghana Commodity Exchange (GCX), Ghana EximBank and Ghana Agricultural Insurance Pool (GAIP).