Govt must encourage agric insurance - New Year School panelists
Speakers at the 68th Annual New Year School and Conference have called on the government to formulate a national policy that will make it mandatory for financial institutions to demand an insurance policy from players in the agricultural production value chain before advancing any money for a project.
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That, they said, would help boost the confidence level of the financial sector in the agricultural value chain, as well as to scale-up the penetration of agricultural insurance that had seen low patronage since its introduction in 2011.
The session was on the topic: Agricultural Financing and Insurance.
The General Manager of the Ghana Agricultural Insurance (GAP), Mr Ali Mohammed Kato, the Country Manager of the Agribusiness System International, Dr Betty Annan, the Managing Consultant of IESO Agribusiness Consult, Mr Francis Osei, and the Dean of the University of Ghana Business School, Professor Joshua Abor, spoke at the event.
For several decades, Ghana’s agricultural sector has suffered low investments, minimal technological infusion and general neglect, resulting in marginal growth and contribution to national output.
From 30.4 per cent in 2006, the sector’s contribution to total economic output, measured by gross domestic product (GDP), has declined to 20.2 per cent in 2015.
The drop in the sector’s contribution to GDP can be traced to the steady reduction in its growth rates over the years.
After ending 2008 at 7.4 per cent, growth in agriculture resumed a downward trend; dropping to 5.3 per cent in 2010 before peaking at 5.7 per cent in 2013.
In 2015, growth in the sector dropped from 4.6 per cent in 2014 to 2.5 per cent, raising questions over the impact of various interventions aimed at lifting it.
To help reverse the trend, Mr Kato underscored that the state must put much premium on subsidy to make agricultural insurance products affordable to smallholder farmers in the country.
For that to be successful, he said there should be collaboration among state institutions such as the Ministry of Food and Agriculture and Agricultural Insurance Programmes to determine the kind of crops to be insured.
Adopting mobile financing
For her part, Dr Annan, whose outfit is a nonprofit consulting firm that aligns business interests with those of smallholder producers to confront today’s global challenges, underlined that access to finance was a major challenge in the agricultural sector.
“Therefore to save the situation, mobile finance holds a greater potential for promoting financial inclusion, especially with mobile phones increasingly becoming affordable,” she said.
She said due to the expensive nature of building bank branches, coupled with difficulty in convincing the ‘unbanked’ to use formal banks, stakeholders must promote mobile financing to provide financial inclusion access to rural under-served agribusiness value chain actors.
She noted that farmers have come to appreciate the privacy, efficiency and accountability Mobile Money Transfer (MMT) provides and were now patronising the service.
Putting right Policies in place
Mr Osei cited that over the years, the sector had been characterised by low productivity and low technology adoption.
“As a result, communities in the country are stuck in a cycle of subsistence farming and for many households, low agricultural growth means poverty and malnutrition,” he said.
He mentioned lack of access to investment, agricultural technology, markets, poor infrastructure and a short farming season as some of the challenges impeding the growth of the agricultural sector.
These challenges, he said, had resulted in reduced yield in the sector despite the ongoing interventions in the form of subsidies and development aid.
“Right Policies and actions that address risks associated with agriculture will improve and enhance capacity of financial institutions to lend to agricultural needs” he said.
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He also called for the development of inclusive agribusiness models to make smallholder financing attractive to financial Institutions in the country.
Financing opportunities
Prof. Abor said the agriculture sector, though beset by a lot of risks has a lot of financing opportunities that make business sense.