The challenge of access to credit by farmers continues to hamper the growth of Ghana’s agriculture production.
While the financial institutions are constrained by the high risks in the agriculture sector to advance substantial loans, state agencies have failed to develop sustainable funding systems to support farmers.
Although some of the financial institutions often grant credit to farmers, they have often been disappointed in the repayment, especially in the absence of structures effective renegotiation of loans to farmers.
The situation often results in strained relations between financial institutions and farmers, as well as collapsed farm businesses, resulting in a high rate of non-performing loans.
But the solution could be found in a Farmer-Lender Mediation mechanism that helps parties to resolve farming related debts effectively.
The farmer-based mediation system, which is producing significant results in some countries especially the USA and Canada, in helping financial institutions to recoup their funds, while enabling farmers to repay loans conveniently, can be actively adopted in Ghana to boost agriculture production.
How it works
The system focuses on mediation, which involves the use of a mediator, who is a professional, impartial facilitator, to assist in the negotiations of parties in a dispute. Mediation is an informal and confidential process which requires less cost and time than adversarial court litigation.
A farmer in debt has the opportunity to renegotiate, restructure, or resolve farm debt through Mandatory Farmer-Lender Mediation.
During an agreed period for mediation, for instance, during a 90 day period, creditors in mediation may or may not collect the debt. The use of the term mandatory does not mean that the farmer must use mediation. It means that no creditor can start a proceeding to collect a debt against a property until the offer of mediation has been extended and, if the farmer so chooses, completed.
Among other aims, the goals of Farmer-Lender Mediation are to achieve open communications between the parties to resolve differences, create a non-hostile environment, define the rights and responsibilities of the debtor and creditor, treat all parties with dignity and respect; and produce agreements that are acceptable to all the parties involved
As part of the mandatory system, a creditor with a secured debt of say more than GH¢20,000 against an agricultural property must offer Farmer-Lender Mediation before proceeding with foreclosure, repossession, cancellation of a contract, or collection of a judgment.
The first step is an orientation meeting if the farmer chooses to take advantage of the mediation offer. The farmer, creditor, financial analyst, and the mediator meet to explain the process and to determine if financial information needs to be prepared.
The mediator leads and manages discussion as an impartial party using neutral language without making decisions or judgments.
The mediator is expected to ensure that all participants in mediation get to speak and be heard, helps to define issues, emphasises common goals, keeps the discussion focused and moving forward, looks at all options, and reduces fault finding.
The mediator may advise, counsel, and assist the parties in ways to agree, but does not tell the parties how they should conduct their business or personal affairs. The mediator does not take sides or decide how the dispute should be resolved.
Expected outcomes
According to studies on the farmer-lender mediation, successful mediation requires compromise on the part of both debtor and creditor.
Farmers may have to either change operation to make it profitable or liquidate assets, while creditors may need to restructure debt and security or reschedule loan payments
Benefits
The parties involved retain control over the outcome of the negotiations in a joint decision-making process, regardless of the specific outcome of the mediation.
Trust is built, and solutions are uncovered when parties meet face-to-face to exchange information in an orderly way. The parties have strong incentives to make their agreements work because they created the agreements themselves.
Also, studies on participants of farmer-lender mediation, commonly show that the process often resulted in the farmer becoming more prepared to make decisions about the future, improved communication between lenders and borrowers, while frustration and tension between parties is minimized.
If mediation does not result in an agreement, the parties are free to pursue whatever course of action is available to them – most often with a clearer understanding of the facts, the issues, and the positions of the other parties.
In Ghana, agricultural and financial regulatory bodies could jointly adopt the system as a way of promoting access to credit for farmers, while guaranteeing the security of the investment.
In the absence of that, aggrieved farmers and creditors could benefit more by opting for voluntary mediation to amicably settle their disputes, instead of heading to the courts for litigation.
By: Nii Adotey/adrdaily.com
