Agric financing is risky business- Frank Adu Jnr

The Managing Director of CAL Bank Limited, Mr Frank Adu Jnr has described the agriculture sector as a risky venture for banks to invest in.
He said to do so, a bank required good structures and equal benefits as other players in the industry before taking that risk.
His comments comes on the heels of the just ended 11th edition of the Ghana Banking Awards, at which no bank emerged the best in Agricultural Financing to the disappointment of many considering the contribution of the sector to the economy.
The phenomenon is an indication that less effort is being put in by key players in the financial services sector, particularly the banks to develop the agricultural sector aside from the Agricultural Development Bank which was established solely for that purpose.
The Agricultural Development Bank, the only bank which does that, he said was tax exempted because it was mainly established to finance agriculture hence they were able to price cheaper and that puts them at an advantage over the other banks, thus if all banks wanted to go into agric financing then they should also be tax exempted.
Aside from the tax exemption benefit, Mr Adu Jnr told the Graphic Business that the risk of losses in agricultural financing was very high as a result of the unavailability of a good market, lack of storage facilities, the lack of proper transport network, among other things.
Mr Adu Jnr also explained that it would be very unfair for a bank paying 25 per cent corporate tax to compete favourably with a bank which did not pay tax in financing in the same project and thus advised government to use its mandate to encourage investments into designated areas of development.
Citing the bank’s experience of losses when it veered into the area some time past, he noted that every bank needed to protect its balance sheet and consider benefits associated with any expenditure before doing so.
Adding that although the bank contributed to agriculture, it was very minimal and focused on other sectors which had yielded results over the years.

FIRST QUARTER RESULTS
Taking its turn at the facts behind the figures on the Ghana Stock Exchange, Mr Philip Owiredu, an Executive Director of the bank disclosed that the bank recorded an impressive growth in the first quarter of 2012.
The Bank recorded a profit before tax of GH¢10, 439, representing a 126.4 per cent over the GHC¢4,940 figure recorded for the first quarter of 2011. Net interest income also grew by 36.0 per cent over the 2011 figure to GH¢12, 570 this year.
The bank also attained a profit after tax of GH¢7, 830 and subsequently earned GH¢0.0315 ratio earnings per share.
On their balance sheet, the bank’s total assets grew from GH¢ 524,884 in the first quarter of 2011 to GH¢ 843,705 in the first quarter of 2012. Customer deposits also went up by 80.6 per cent in the same period under review from GH¢309, 505 to GH¢ 558,840 in 2012. Shareholders fund’s in the bank went up from GH¢ 80,391 to GH¢ 100,234in the first quarter of 2012.

GROWTH STRATEGY FOR 2012
Mr Owiredu further explained that the bank was focusing on strengthening and expanding various sections in the bank with respect to corporate banking, treasury, retail portfolio, cost of funds and Information Technology infrastructure.
The bank, he said, was poised to expand and strengthen corporate banking and corporate finance loan portfolio by focusing on growing sectors in the economy, such as oil and gas, mining and telecoms.
In strengthening the banks treasury activities, the bank he hinted, would capitalise on trade finance opportunities from growth in economic activities while developing and promoting relevant treasury products for their clientele.
Mr Owiredu also explained that the bank would develop a sound retail portfolio with focus on asset backed lending, investment in alternative delivery channels to spread their footprint and improve on brand visibility.
Cal bank would also expand its operational network in strategic areas by reducing cost of funds and deposit concentration by increasing retail deposits.
The bank he said would also enhance IT infrastructure to augment its service quality and focus extensively on process automation, enhancing management information systems and investments into modern communication systems.
Mr Owiredu also added that the bank would use its secured funds to increase its working capital, expand its branch network and invest in IT infrastructure.