Funds to farmers should be well targeted — Agric researcher
A lecturer and Researcher at the Department of Agriculture at the University of Ghana, Dr John Jatoe, has said proper targeting is a key element to the success of any funding/support to the agriculture sector.
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In an interview with the GRAPHIC BUSINESS, he said for any such support to farmers, it would be important to clearly define guidelines on what the funds could be applied for, who qualified and under what arrangements they would have to pay back once it was not a grant.
His comments come in the wake of hints from government that a funding scheme that will specifically go to support Ghanaian farmers will soon be launched, under which lending risk will be shared between potential beneficiaries and the Bank of Ghana (BoG).
The Minister of Food and Agriculture, Alhaji Mohammed Muniru Limuna, at the launch of the Ghana Agricultural Sector Investment Programme (GASIP) in Kumasi, said the BoG would serve as guarantor for farmers and would absorb 80 per cent of debt in the event of losses caused by natural disaster.
He said the central bank would take it up and guarantee for the farmers by insuring certain natural disasters on behalf of farmers while measures were put in place to check abuse of the systems.
Dr Jatoe said if the BoG was the guarantor then it would mean that if they were to default, it would have to pay, therefore, it would be important to know how much was involved, who was administering, who qualified to access it and what arrangements were in place for paying it back.
Another important aspect, he said, would be post-harvest management.
“What arrangements are in place to ensure that anybody who has access to such funding facility once they harvest their produce they are able to access market and, therefore, generate needed revenues to be able to pay back because it’s one of the critical elements in our environment here that is often overlooked and creates its own problems,” he said.
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He added that “farming is a seasonal activity and when farmers get good yields then the prices slump and you may have a very high yield but generate little income or the payment schedule is such that it coincides with those harvest periods during which prices are low and even if you were to have storage you will still have a problem because you must have access to some funds somewhere to be able to pay back and hold all your produce for better prices”.
Dr Jatoe said such funding scheme could have a great potential to ensure food security.
“Government itself has very limited revenue and if we look at it we have a huge mass of farmers so if the fund doesn’t specify at the onset who qualifies it creates a lot of problems and will make the fund administrator’s work difficult,” he said.
Challenges with funding agriculture
The risks associated with agriculture are so high that banks are afraid/have refused to lend money to farmers.
Agricultural experts and all other stakeholders interested in the growth of the sector have repeatedly called on government to either channel resources or seek alternative funding to develop the agricultural sector to the benefit of the economy.
Successive governments have often been accused of engaging in tokenism in terms of the support that is provided to the sector.
Again, requirements by financial institutions have made it difficult for anyone along the agriculture value chain to secure funds. The demand for collateral to the high interest charged on such loans often makes the repayment of such loans difficult even when successful.
Natural disasters like bush fires and inconsistent weather conditions also contribute to the lack of funding to the sector.
Some analysts argue that the inability to address challenges in the sector has led to so many stakeholders channelling their investments into other businesses.
Most studies have also recommended that Ghana has a comparative advantage in the agriculture sector and so should take urgent steps to not only modernise cultivation of agro products but also add value for exportation.
GASIP
It is an agricultural value chain programme designed to be private-sector driven in its approach to facilitate and promote agribusiness.
GASIP is being implemented by the MOFA and aims at contributing to sustainable poverty reduction in rural Ghana, ensuring that agribusinesses, including smallholders, increase their profitability and resilience to climate change.
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Basic programme costs over six years, including contingencies, taxes and duties, are estimated at US$113.0 million or the equivalent of GH¢297.9 million.
A total of US$71.6 million of IFAD funding will be mobilised for the first six years (two cycles). GB