New ADB board bares teeth

… to pursue loan defaulters

Although barely a month old in office the new Board of Directors of the Agricultural Development Bank (ADB) have already sent strong signals to their clients they would apply their oversight authority to the letter.

The bank under the authority of the board has embarked upon intensive recoveries of credit and loan facilities granted customers who have failed to repay overdue principals (monies borrowed) and accrued interests.

In a strongly worded public notice issued in the media, ADB has set a 21st September, 2009 deadline for such customers whose facilities are overdue to repay, “failing which their names would be published in the media.

“Towards this end the Bank shall publish the names of such defaulting customers in newspapers in circulation in the country”, the notice stated, adding that legal action would follow after the publication of names.

The maximum credit risk exposure of the bank as at 31 December, 2008 is GH¢ 370,606,658 to customers. Out of this GH¢ 64,048, 007, representing 17% of the total advanced to clients has been long over due since December 31, 2008, while GH¢306,558,651 had not been due.

The bank posted a profit of GH¢ 14.93 million for the same year which represents approximately 23.3% of advances past due, but not impaired.

In the sectoral analysis of advances presented in the bank’s 2008 Annual Report, the bank which was established with a statutory obligation for agricultural funding, allocated the largest chunk of its loans portfolio (35.88%) to the service sector while Agric came second with 27.87%.

And although agricultural funding grew in actual terms from GH¢ 91.16 million in 2007 to GH¢116.15 million in 2008, in percentage terms, it dwindled from 34.37% down to 27.87% as a share of the total credit portfolio.

Sectors such as manufacturing, commerce and Finance, Mining and Quarrying, construction and fuel and gas which fall under the focus of the National Investment Bank (NIB) found expression in the credit portfolio of the bank.

Financial Institutions in the country traditionally shy away from agric financing, since studies have shown it is a risky venture in a country where crop production remains weather dependent, leading to high default rates The bank’s annual report for 2008 noted that there were challenges presented by credit management. This challenge, it said required that additional provisions were made “to further clean the loan book of the bank”.

It said the provisions charged for the year 2008 therefore increased from GH¢ 3,831,236 in 2007 to GH¢ 6,923,146, representing a jump of 81%.

In addition, while the concentration of credit risk as monitored by the bank’s credit risk monitoring team shows that the risk on agric sector lending dropped from 30.08% in 2007 to 24.33% by 31st December 2008, that of the service sector rather rose, albeit marginally, from 34.32% 35.88%.

It is therefore expected that the new board, chaired by no mean a person than Alhaji Ibrahim Adams, a former Agric Minister with Dr. Samuel Dapaah a former Board Chair of the same institution and a former Chief Director of the agric ministry serving on it, as part of its mandate would monitor the activities of the credit-committee and sub-board Risk Management Committee closely to ensure that they work assiduously to reduce the bank’s risk exposure considerably.