The news that agricultural insurance cover to the tune of US$ 100 million is about to be provided to rice farmers, by the government is most welcome.
Rice farmers have not been part of the Ghana Agricultural Insurance Pool which has been in operation for several years now and which has provided beneficiary crop farmers with cover against production risks and therefore has guaranteed their incomes against poor harvests.
Combined with the Pool, the latest initiative will thus assure a significant segment of Ghana’s farming populace of guaranteed incomes.
This in itself is crucial in that farmers engage in arguably the riskiest economic venture, but one that is crucial for living standards of the entire citizenry.
But even more importantly, agricultural insurance opens the doors for farmers to overcome their biggest constraint – the availability of credit with which they can carry out their activities optimally.
Commercial lenders are understandably reticent about providing loans to farmers because of the inordinate levels of financial risk involved. Apart from the operational risks that enterprises face in other sectors of economic activity, farmers are also exposed to the vagaries of the weather which poses the biggest risk of all.
Consequently, farmers incomes tend to fluctuate widely which makes them inordinately large credit risks.
But with the advent of agricultural insurance which provides cover against poor production levels and consequent low incomes, farmers become much better credit risks; commercial lenders can assess the viability of the loans being requested of them based on the guaranteed incomes resulting from their insurance cover.
Access to credit on commercial terms has the potential to dramatically change the production potentials of Ghana’s farming populace. More money means more production inputs, higher productivity per acre of land cultivated and ultimately more production.
This is why this newspaper urges stakeholders in the insurance industry to accelerate the passage of the recently drafted new insurance law through Parliament, since the new law focuses heavily on the provision of agricultural insurance.
The draft Insurance Law has been several years in preparation and we believe that it should be ready to be presented to Parliament by now. Any more delays equally delay the introduction of a framework that will enable farmers in Ghana access the credit they need in order to expand their production.
In a country that imports far too much food, considering its own domestic food production potentials, this is of crucial importance. Let the new Insurance Law, replete with its emphasis on the provision of cover against production risks incurred by farmers, be introduced as quickly as possible.