The Ministry of Food and Agriculture has explained that the proposed Ghana Incentive-based Risk Sharing System for Agriculture Lending (GIRSAL) is a way of reducing risk to commercial banks in order to encourage them to give credit to farmers and agricultural enterprises.
The Ministry is partnering the Bank of Ghana to establish a fund scheme to help accelerate agricultural growth to enhance foreign exchange-earning potential of the country.
Speaking to Class Business, Deputy Minister of Food and Agriculture, Dr Alhassan Yakubu, said the fund scheme had come about due to the reluctance of banks to lend to the agricultural sector.
“The Ministry engages the commercial banks or the conventional banks but they always explain the risk is too high for the agricultural sector and, therefore, they are very reluctant to invest so much in the sector and, so, an ingenious way of reducing this risk is to link up with the Bank of Ghana so that they could provide these incentives to share the risk with the commercial banks so that if the risk is reduced, the commercial bank will feel more amenable to lending to the sector,” he stated, adding: “So, it’s a combination of credit risk-sharing and also incentive in insurance so that we can have the commercial banks becoming more responsive to the credit needs of agricultural enterprises.”
According to Mr Yakubu, the ministry has employed consultants to put the entire scheme together for the consideration of the Bank of Ghana.
“A technical committee is currently in place, they have done all the necessary pre-programming arrangements and what is left is to get the totality of the document put together for consideration of the Bank of Ghana, after which the legal instrument or the legal framework within which it can operate will also be put in place,” he stated.