Sinapi Aba turns to agric financing

Microfinance company Sinapi Aba has turned attention to agriculture financing as a way to contribute to making the sector unlock its potential.

Last year, the microfinance institution, which has predominantly been funding commerce and personal finance, devoted about GH¢10 million to the sector, financing not only farmers but also input suppliers, aggregators (marketing firms), processors and other players within the value chain.

“Our interest in agriculture has come about because we realise a large portion of the population are into agriculture. Out of the number, about 80 per cent are in the informal sector. Therefore, as a company with a mission to transform lives, we needed to look at this sector so that we can help them to create businesses from agriculture, to generate income and improve their lives,” the Chief Programme Officer of the company, Ms Joyce Owusu Dabo, told the GRAPHIC BUSINESS at the second Ghana Agribusiness Investment Summit in Accra.

Although the company has been doing some level of agric financing, it has since 2007 been scaling up the portfolio with the assistance of some development financial institutions interested in green growth and climate change. They include the United States Agency for International Development-Financing Ghanaian Agriculture Project (USAID-FinGap), the Danish International Development Agency (DANIDA) and the German Technical Cooperation (GTZ), supporting it with patient capital.

Currently, Ms Dabo told the GRAPHIC BUSINESS, it supports about 12,000 farmers and other value chain players in the areas of soya, rice, maize, cocoa and animal husbandry such as piggery, goats, sheep and poultry.

“We realised that it is a venture that you need to work into by putting your systems and structures in place to mitigate your risks,” she said.

About 42 per cent of the country’s employed population is in the agriculture sector, with about 80 per cent of the number being in the informal sector keeping smallholder farms on subsistence levels.

The sector’s contribution to total productivity in the economy stands at about 22 per cent, having ceded its lead role to the services sector which now contributes about 53 per cent.

Hitherto, every individual farmer will reach out to a financial institution for credit to finance their farming activities. Since the sector is mainly rain-fed in the country, a bad weather would mean poor harvest, which often rendered the loans bad.

This rendered the sector very risky to credit. However, a new wave of air is blowing across financiers. First, they get farmers to group into cooperatives where they receive training to change their attitude about making the venture a subsistence trade to a real business.

Hence, while access to credit has been a major challenge for businesses in the country, especially for small and medium enterprises (SMEs), the situation is even more severe for the agricultural sector. Only about four per cent of lending in Ghana goes to the agricultural sector.

Some business advisory service providers, be they NGOs or private companies, are usually hired as consultants to deliver the service. This is a departure from the over-reliance on extension officers which had a small ratio to the farmer population.

Second, the credit institution advances credit to the cooperative for its members. As such, members serve as insurance against the default of one another. The group, therefore, has its own norms and modes of sanctioning defaulting members, thus helping to mitigate part of the risks that bedevils the sector.

Therefore, Sinapi Aba says it is offering a full package to the farmers to grow them from the subsistence level to small businesses and eventually to large operations, saying, “We want to ensure availability and access on time in the right quality and quantity.

“This involves value chain financing and linkages on the value chain so that all the needs of the farmer is met and market guaranteed for income protection, leveraging development financing to give funding at competitive rates and with this we are able to support the farmers with patient capital.”

The summit was to share information amongst agribusiness value chain players, discussing the challenges, investment and financing opportunities.

The USAID organised the summit as part of FinGAP, an initiative within the framework of the US government’s Feed the Future programme.

“The dialogue we have here today will bring into focus the Credit Constraint, which I would like to address with a special view on Ghana’s agricultural sector. As some of you may know, the U.S. government, through USAID, has committed to invest US$250 million through President Obama’s Feed the Future Initiative,” the US Ambassador to Ghana, Mr Gene Cretz, said.

This event is about you, meeting your needs as agribusinesses, and needs as financial institutions to maximise good investment opportunities with minimal risk.

He said the USAID, through the FinGAP project, supported both the supply side of finance as well as the demand side through a Business Advisory Service Providers’ network focused on helping agribusinesses identify opportunities.

FinGAP, the five-year USAID project to facilitate finance and investment in the soya, rice and maize supply chains in northern Ghana, has since its maiden summit last year facilitated the investment of US$13.5 million into agribusiness, the Chief of Party, USAID-FinGAP, Mr Rick Dvorin, has said.

Source : Graphic Online