Business News of 2014-07-23

Force banks to do agric financing — Fidelity Bank

The Managing Director of Fidelity Bank, Mr Edward Effah, has proposed to the government to make it mandatory for commercial banks in the country to set aside a proportion of their assets to support the growth of the agricultural sector.
He said correcting the current funding gap facing the agricultural sector would require actions beyond the individual dictates of the financial institutions and added, "Maybe, we the banks should be forced to invest in agriculture”.
Making his case for the idea at the GRAPHIC BUSINESS/FIDELITY Breakfast Meeting in Accra on July 15 on the theme, 'Maximising value of exports to improve Ghana's Trade Balance,' he argued that “This is not new; in other countries such as Brazil, India and other countries, banks have been forced to invest in agriculture by putting about 10 per cent of their assets in agriculture."
"This, we (Fidelity) believe, could help us look at the issues with government with the private sector on how to get agriculture to work. This is the path many countries have followed throughout the world and there is no point in us reinventing the wheel," he added.
Opposing view
But while Mr Effah and his staff at Fidelity Bank may be prepared to carry through with that strategy should government accept to implement it, his counterparts in other banks disagreed and described the proposal as an indirect attempt to get the government to thwart the free will of banks to individually choose the sectors they want to lend to.
When the paper sought the view of the Ghana Bankers Association (GAB) at its 14th Annual Luncheon in Accra, a day after the proposal was made, the President of the association, Mr Simon Dornoo, and his other colleague executives strongly opposed the idea.
According to them, there were lessons to be learnt from one bank which was solely established to go into agric financing to guide the way forward. “In the environment we find ourselves, such a policy will not be the best for our industry so I feel we should be made to take those decisions as individual banks and not be forced into doing so”, Mr Dornoo said.
However, he pointed out that each commercial bank in one way or the another, did agric financing and that it was evident from their balance sheets. “Banks support different areas in the agric value chain and once they identify a sport they find profitable, they will do it at all cost by ensuring that they will not lose out”, he said.
“We will want the government to take a critical look at the sector to create the necessary environment to attract banks to support the sector without the nature of teething challenges bedevilling the sector”, he said. Dr Dornoo said there were serious issues of land tenure in the country and that also affected the agricultural sector seriously.
"The issue is not us shying away from agric; it is about the fact that banks are not non-governmental organisations (NGOs), where you would want them to promote a certain course. We have shareholders and stakeholders who would demand accountability and profits from us and because of these things, we put our monies in areas which are profitable," the Managing Director of Zenith Bank, Mr Daniel Asiedu, told the paper in a separate interview.
"We also need to manage our risks. If we think that an area is too risky, we can't put our monies. It is government that can decide to promote a particular sector of the economy by just channelling money into it without looking at the profitability; may be just seeing that investment as social responsibility but to force banks to invest in the agriculture sector would not be too good," Mr Asiedu added.
Luring banks into agric
Instead of forcing banks to lend to agric-related businesses, the Zenith Bank MD said, government could partner with the private sector to restructure the agriculture sector, reduce the risks associated with lending to it and in the process, help attract banks to increase funding to the sector.
"If we have a well-structured agriculture sector which is viable, we ourselves (the banks) would be begging that we want to push money there," he added, adding that incentives such as tax reliefs could be used to bate banks into the sector. "In sometime past in Nigeria, loans granted to agriculture didn't attract corporate tax. So, the government can come out with something like that and that will force some banks to at all cost to look at that sector," Mr Asiedu said.
Arguments for agric support
Mr Effah had argued that it was only through increased lending to the agriculture sector that the country would be able to cut down its over dependence on imported consumables.
"There is great and urgent need for us to develop a strong agro-processing base for a country that has about 60 per cent of its people depending on agriculture. We have good land, intelligent people yet we invest about US$350 million importing poultry; just poultry alone, but if you add other niche products, it’s going to about US$700 million. All these are products that we could very easily produce in this country," Mr Effah said.
Source: graphic.com
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