RISK AND PRIMARY COMMERCIAL LENDING IN GHANA

ABSTRACT

It would be hard, if not impossible to overstress the importance of

agriculture in the growth and development of Ghana's economy. Despite

our concentrated efforts at industrialization, Ghana, like other African

states, remains predominantly an agrarian society. Yet, despite

agriculture's strategic role in the performance of the Ghanaian economy,

financial institutions (especially commercial banks) have always shown a

marked reluctance to plough funds into increasing the production and

marketing of food, as demonstrated by the amount of credit extended to

the agrtcuItural sector. It is argued by Commercial banks that the

agricultural sector is characterised by a greater risk vis-a-vis other sectors

of the economy. Uling risk and statistical analyses as employed by Okorie

(1985) in a similar work, the study presents empirical evidence to refute

this assertion. It concludes in particular that the risk characterising lending

to the agricultural sector is not significantly higher than that identified with

the other eectors of the Ghanaian economy ·during the years under review.

And generally. that the risk elements of the entire economy have declined

subaIIIntiaIIy for the three primary commercial banks, since the

implementation of FINSAP. The study therefore recommends that

~$~:;eamrnerciaI banks should increase their investment in the agricultural

'~. which will pfOWide .'1:JedrOCk to support the country's programme of

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