With less finance flowing into the agriculture sector, the Bankers Association sees the need for a realignment of the relationship between commercial banks and farmers.
Guyana Bank for Trade and Industry (GBTI) CEO John Tracey, speaking on behalf of the Bankers Association at the opening session of a three-day Agricultural Risk and Insurance Symposium, organised by the Ministry of Agriculture, the World Bank and the Inter-American Institute for Cooperation on Agriculture (IICA), noted the high-risk nature of agriculture but said commercial banks must pay attention to the sector.
Tracey noted that total bank financing to the agriculture sector for 2008 was $3.9 billion, compared with $8.7 billion for year 2000; loans to farmers for 2008 totalled $1.1 billion, compared with $1.7 billion for year 2000; and as a percentage of total bank financing, agriculture accounted for 16% in 2000, compared with 6.1% in 2008. He attributed the situation to the high risk in the sector, citing the inefficiency in the use of natural resources such as water in agriculture in the Caribbean, low productivity and the inability of the sector to achieve the economies of scale, as being among the noticeable features. Tracey also said the sector brings low returns on investments, which lead to a requirement of longer-term financing.
According to Tracey, the Guyana government has done a lot to develop the agriculture sector, but he noted that more needs to be done to address poor infrastructure in rural areas. Other factors influencing the relationship between financiers and the agriculture sector are the slow pace of the introduction of new farming/production techniques and the slow adaptation by farmers and producers to a changing market, especially in the area of demand. Tracey explained that consumers would prefer quality foods with good nutritional characteristics and he noted that this needed to be addressed by the relevant stakeholders.
Tracey conceded that commercial banks have not placed much emphasis on the agricultural sector, which he said needs to be done. He added that another factor which may have contributed to this reality is that banks are urban-based, while the agriculture sector is rural-based.He said the banks are bottom line-focused and that they are not staffed adequately to serve the agriculture sector, while noting that lending terms on loans are not flexible to encourage access to long-term loans by farmers/producers. Tracey said that how commercial banks spend their advertising dollar tells the story — on car and house loans, among others — and he noted that he could not recall recent advertisements directed to the agriculture sector.
He added that commercial banks also operate within a difficult legal framework, stating that the ancient Roman/Dutch land laws need to be addressed, while pointing out that attorney Anil Nandlall made mention of this legal hiccup recently. Tracey also pointed to the three to six-month waiting period for farmers to secure loans, which, he observed, would be of little benefit to them. The Financial Institutions Act, he added, also does not cater for the small players within the agriculture sector and he called on Agriculture Minister Robert Persaud to address this.
Tracey commended the administration on interventions within the agriculture sector, especially in the rice industry, since, according to him, the commercial banks “would have bad loans on books.”
Meanwhile, Persaud said the major players within the agriculture sector, including farmers, banks, microcredit providers, insurance companies all have important contributions to make. He noted that by forming partnerships geared towards the development of the agricultural sector, stakeholders can come up with one or multiple complementary risk management models, which will work in Guyana. If successful, he added, those involved in agriculture will be able to better plan their businesses and investments. He said while random occurrences such as weather-related events cannot be controlled, stakeholders would be in a better position to control the impact of such events on their lives.
Persaud explained that the symposium comes at a critical time for agriculture, which he said has been neglected as a sector the world over for too many years.
He alluded to last year’s development report, in which the World Bank conceded that over the past 20 years the agricultural sectors have suffered from neglect and underinvestment.
After a food and financial crisis that has taken a toll on poor people, Persaud said, the future will pose further challenges with the growing world population — estimated to surpass 9 billion by 2050 — and a 70% food output needed to feed this growth in world population. He noted that Guyana, being the only net food exporter within the Caribbean Community, with significant excess capacity to substantially increase its food exports to other markets, is at the core of the region’s food policy.
Persaud told those gathered that the government has looked at innovative ways to reduce the sources of risk in the agricultural sector, including in the areas of training and education in best crop and livestock husbandry practices.
That is not enough, he said, adding that the time is ripe for the development of an overarching risk management strategy for the agricultural sector. He posited that the symposium is a critical milestone in such an effort.
At the forum, a number of presentations were made by relevant public and private agencies, including the Civil Defence Commission (CDC), the HydroMet Department as well as the Bankers Associa-tion of Guyana. Following the symposium, insights are expected to be gained into the predominant agriculture risk factors in Guyana, the policy measures that have already been put in place to mitigate such risks, potential initiatives and agricultural insurance tools that could be introduced to manage the risks existing in agriculture, as well as a public sector policy framework for managing agricultural risk in Guyana.
