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Page last updated
February 15, 2003




A Vision; To be an African giant


The Agricultural Development Bank in Ghana has turned out to be one of the few outstanding successes, out of the many post-independence experiments in Sub-Saharan Africa to promote economic development through targeted financing by specialised development banks. In line with the realisation that modernisation of the predominant agricultural sector holds the key to any meaningful progress in the quest for overall national economic development, the post-independence government in Ghana actively promoted agricultural credit financing as an institutional obligation which eventually culminated in the setting up of the Agricultural Development Bank in 1965.

Three decades later, this experiment has produced a classic testimony. "We have a lot to be proud of," says Dr. P.A. Kuranchie, currently Managing Director of the Bank in a recent media interview. "ADB is now well-positioned to play a significant role in the transformation of Ghana's agriculture", Mr. Nathan Quao, Chairman of the Bank's current Board, stated in the Bank's last Annual Report.

History & objectivnes
As a state - promoted institution, ADB's overriding objective has been to mobilise financial and human resources to meet the country's development needs in agriculture. It began as a department within the central bank - Bank of Ghana - with responsibility for organising agricultural lending schemes and assumed a fuller status with its incorporation under Act 286 in 1965 as the Agricultural Credit and Co-operative Bank. It eventually assumed its present name in 1967 through an amendment of its establishing legal instrument.

By law, ADB is mandated to primarily provide credit facilities for the development and/or modernisation of agriculture and allied industries, the processing and transportation of agricultural produce, financing of cottage industries, and management of special funds and loans raised for purposes of agricultural development.

In line with this purely credit management function within the national economy, ADB has for many years provided short-term, medium-term and long-term loans for various agriculture-related operations. Its short-term loans for periods up to 11/2 years are to meet mainly the production, transportation and marketing costs in farming. The medium-term loans for periods between 11/2 and 5 years are for purposes such as the purchasing of farm equipment. The long-term loans for periods beyond 5 years are devoted to new and existing agricultural projects which require heavy capital outlay and long gestation period.

In the past, the Bank actively undertook investment in numerous large-scale commercial agricultural and related operations, including oil milling, ranching, meat processing, rice cultivation and milling, mechanised services and equipment leasing, poultry production, feed milling and deep-sea fishing. Most of these ventures have since been divested from the Bank.

New Strategies
In pursuit of the promotion of large-scale agricultural investment projects, ADB has had to adopt new strategies. Firstly, it is no more dependent on government sources of funding for its lending schemes. In addition to funds sourced locally and internationally sometimes with government assistance, the Bank also attracts its own funding through deposit mobilisation and international lines of credit. Furthermore, it collaborates with international bilateral, multilateral and non-governmental organisations participating in the development activities of the country, usually by providing funds management services or handling the credit-delivery and recovery component of these programmes.

Secondly, ADB no longer operates as an organisation solely for the dispensing of credit schemes. It has now adopted the complete posture of a Bank. Its deposit-holding and other banking-service operations are as important as the credit operations. Apart from meeting the credit needs of the agricultural sector and related allied industries, ADB now has the full compliment of staff, branch network and product line to provide the entire range of banking services. This has helped to strengthen the bank through deposit mobilisation, broadening of its customer base, and ability to handle all classes of customers.

Thirdly, ADB has increased its profitability and viability in the wake of increasing competition by seeking partnership with the private sector in the promotion of large-scale commercial ventures. This is in line with the recognition of the private sector as the engine of growth. ADB provides the financing required with minimal or no direct equity stake in these ventures. These include both fully Ghanaian-owned agricultural projects and joint ventures between Ghanaians and foreigners.

Operational performance
Like the other state-owned banks, ADB used to perform poorly, due to the decline which hit the domestic economy throughout much of the 1970s and early 1980s. The threshold in this abysmal performance came with the implementation of an extensive management and institutional restructuring of the banking sector in 1990 /91. Fortunately, ADB is one of the banks which turned around its fortunes so quickly to register a strong operational performance since 1992.

As acknowledged in a recent World Bank study, ADB is the most profitable agriculture-oriented financial institution in the West African sub-region and one of the few remarkable successes in the promotion of a viable institution for agricu- ltural financing in Sub-Saharan Africa.

Beyond its financial indicators or indices of performance, ADB has chalked numerous unquantifiable achievements as well. Firstly, with the de-regulation of both the agricultural and financial sectors, almost all other banks have either completely withdrawn or substantially reduced their agricultural loan portfolios, leaving ADB to provide the bulk of total bank lending for the agricultural sector. The share of ADB is estimated to have risen from about 15% by the beginning of the financial sector reforms to over 85% in 1999. This is no mean achievement in a sector largely seen as a high-risk sector.

A recent study has indeed noted that agricultural output has increased in those very sub-sectors in which ADB has actively intermediated. These have included cotton, maize, non-traditional exports, poultry and cocoa production. There has also been a consistent improvement in domestic food production, self-sufficiency in egg production and near self-sufficiency in the poultry sub-sector with a year-round availability of food, more stable prices, improved farm-incomes and a general improvement in the national food security programme.

Specific mention need be made of the transformation of Ghana from being a net importer of lint cotton to the position of a net exporter; indeed, Ghana is currently exporting about two-thirds of its domestic lint export. A large increase has also been recorded in such non-traditional exports as pineapples, cassava chips and papaya. But for the difficulties in the export of Ghanaian bananas to the European Community, this is another area where the impact of ADB's financial intermediation has also been excellent.

ADB has made further commendable contribution in the promotion of agricultural credit concepts. Those inclu- de the group lending and the nucleus-outgrower concepts. From experience, the group-lending scheme has been responsible for much of the success in extending credit to small-scale farm-operators. This involves giving either bulk loans to groups or individual loans to individual members identified with specific groups. Peer influence enh- ances both the utilisation of the loans and the repayment performance.

This success has been enhanced even further by the nucleus outgrower concept under which financing support is channelled to a group of small-scale farmers (outgrowers) through a large-scale operator (nucleus farmer) linked to them in their community. The nucleus farmers organise and provide logistics, inputs and technical support to the satellite or outgrower farmers in a particular catchment area. The overall objective is to achieve increased and sustained agricultural growth through the transformation of the structures of production, processing and marketing under environmentally-friendly conditions. The scheme which covers the cultivation of maize, rice, soya bean, vegetable, plantain and pineapples is a significant component of the country's medium-term agricultural policy. The Bank is using a similar strategy to advance credit to the rubber and cotton sub-sectors.

In its mission ADB has targeted agricultural and rural development as a foundation for the country's overall economic development. This explains ADB's collaboration with various bodies in the implementation of poverty alleviation projects in rural communities. The bodies include the International Fund for Agricultural Development (IFAD), the United States Agency for International Development (USAID) and Danish International Development Agency (DANIDA). The focus of these projects has been small-holder food crop producers and small-scale processors. Significant attention has been paid to women engaged in food production, processing and marketing, as well as cottage industries.

Vision & future plans
Three decades on, ADB has an even more arduous task-to strengthen its intermediation role. It has set itself the vision to be the largest and most profitable agricultural-oriented bank in Africa comparable in efficiency with any such bank elsewhere in the developed world.

In realisation of this vision, the bank has begun a major computerisation programme aimed at improving its delivery of customer service and management reporting. Currently, it has completed the first or pilot stage in the exercise, which has seen the linking of two of its largest branches, the Head Office accounting and treasury management operations and its international banking department on an automated wide area network. One other hitherto manual branch has been automated on a stand-alone basis. After a few months testing, the Bank plans to roll-over to a total of 24 branches by the end of the year and the rest in the following year.

Alongside the computerisation project, ADB has launched a programme to adopt the best practices in service delivery and management and also introduce new products into the financial market. This involves the re-launching of the Bank's business to be in line with its vision as an African giant in the global financial market.

Dr P A Kuranchie
Managing Director


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