Accra, June 30, GNA - The Private Enterprise Foundation (PEF), has proposed the establishment of a National Agricultural Fund to support farmers step up production. The suggestion stems from the current low investments levels in agriculture by both the public and private sectors and PEF believes that the establishment of a fund committed to agriculture was necessary to address the financial challenges of farmers. Government's budgetary allocation to agriculture as a percentage of total discretionary spending has declined over the past three decades to about two percent according to a statement issued by PEF in Accra on Wednesday.

Banks' lending to the agricultural sector has also fallen consistently, reaching a low level of four percent in 2007. The Foundation said since the country's medium and long term development strategies hinged on the modernization of agriculture as a basis for industrialization and accelerated economic growth, the proposal for the fund was more than justified. The objective is to raise substantial financial support, to facilitate loans and grants as well as provide the appropriate training which would enable farmers to utilize their maximum potential. This is because government's budgetary allocation to the agriculture sector is inadequate while credit facilities from the financial services industry for the sector are also minimal. This trend, the statement said could be reversed if government intervened in the financial industry with such a fund which the banks could access for onward lending to the agricultural sector. It will support non-farm diversification projects and value added agricultural operations in addition to supporting the whole agricultural value chain to help it become more meaningful in the socio-economic development of Ghana.

PEF said the model fund structure should have a subsidy component to reduce the cost of the various inputs that were used by farmers for production and there should be a marketing centre attached to the management body of the Fund that should be responsible for ensuring guaranteed minimum prices for farm produce.

The Foundation said to ensure the growth and sustainability of the proposed fund, government should provide the seed money while certain percentage of money from the consolidated should be put into the Fund. Besides, government must channel 10 percent of national expenditure to the agriculture sector by implementing the Comprehensive African Development Programme under the Maputo Declaration.

Other sources of funding being proposed according to the statement, were certain percentage of existing taxes such as VAT, import duties, and communication service tax as well as a national agricultural levy among others things. On the management of the Fund, PEF proposed an independent Board, free from political interference, with decentralized offices at regional and district levels. The management body should have representatives from stakeholders, the Ministries of Food and Agriculture, Finance and Economic Planning, farmer based associations, research institutions and civil society groups and the private sector.

The Foundation suggested that the Board should also have a Business Development Services Unit to offer strong business development support services to accompany disbursement of loans. While considering the setting up of the Fund, PEF indicated that it should be necessary to look at the factors which hinder the effective utilization of credit in the agricultural sector, adding that the removal of those factors would ensure that resources from the proposed fund to the sector were not wasted. 30 June 09