ABSTRACT

The main point of this study is the role of “Central bank of Sierra Leone in credit supply to agricultural sector”. The project is intended to focus on the adequate of credit supply to Agricultural sector by the central bank of Sierra Leone’s guarantees scheme has contributed to agricultural financing and the extent the Sierra Leone Agricultural and co-operative bank has contributed to agricultural project financing. The related literature, which, consists of the view of their authors, were reviewed, as it is seen in the second chapter of this project. The source of data is only on secondary sources. It will consist of the use of newspapers, journals, magazines and seminar papers. After all the information gathered in this project, it was discovered at the end that. *The central bank policy guidelines on agriculture are adequate.The sectoral allocation has influenced significantly agricultural financing. The agricultural credit guarantee scheme has contributed significantly towards agricultural programme financing. The recommendation made include that the government should encourage agricultural research by provision of more funds, the financial institutions should be more liberal in their credit policies and farmers on their sides should make efficient use of the funds provided to them and should stop credit diversion.

 

CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF THE STUDY

Agriculture, man’s oldest profession that use to be Sierra Leone’s chief foreign exchange earner, has been neglected over the years because of the discovery of other minerals. This factor has led to the disappearance of most mineral resources in the country like the groundnut pyramid of the North, the cocoa sacks of the west and the palm oil drums of the east. Not only the hard currency accruing from agricultural export gone but the population which continued to grow without a corresponding increase in agricultural production has outstripped he available food supply, hence the need for an urgent. Experts hold that over 90 percent of the rural populace are engaged in farming but these people have little or no access to credit facilities because they lack the requisite collateral to back up such loans. As it should be farmers need money to meet various outlays for seasonal agricultural production for development of land, under standing such allied activities and also to tide over liquidity shortage during  the time intervening the sowing and harvesting of crops.

They need short-term, medium and long-term financing for meeting of production and post harvest expenses as well as processing and marketing of crops. This is why this central bank of Sierra Leone has gone beyond its role as the apex financial institution is the country to harness its regulatory and participating function in the area of agriculture in a variety of ways, some of which are its previously terminated association with the commodity boards, the initiation and management of the Agricultural credit guarantee scheme (ACGS),parts ownership of a specialist agricultural credit institution, initiation if rural banking program, the setting out of a target proportion of commercial and merchant banks loans that will go to agricultural every year. It also made prescription of concessionary rate o the nation agricultural credit study.

The central bank of Sierra Leone has adopted the policies in recognition of the importance of the agricultural sector in the nation’s economy and promotional role which the bank is expected to play in its development. The usual reasons advanced by commercial and merchant banks for giving loans to farmers are the long gestation of many agricultural projects and natural hazards to which seasonal crops are prone to. It was the recognition of these constraints which made the central b bank of Sierra Leone to conceive the idea of the Agricultural credit guarantee (ACGS) as an inducement to the banks to increase lending particularly to small  scale farmers for agricultural production.

The monetary policy by the central bank also enjoined the merchant and commercial banks to allocate not less than 10 percent and 15 percent of their loans to the agricultural sector yearly. All these are effort being made by the central bank of Sierra Leone to see that agriculture being in the primary sector of the economy is well financed. The performance of the commercial banks merchants’ banks, Sierra Leonen agricultural and co-operative bank and the agricultural credit guarantee scheme will be fully analyzed later in this study.

1.2  STATEMENT OF THE PROBLEM

Because of the too much importance of agricultural in Sierra Leone economy, it has been given much concern by the federal government for its realization. However, despite all the clearly mapped out programme for its development of agricultural sector in Sierra Leone is still largely. Under developed. This has been attributed to poor strategies planning and implementation of agricultural programmes. The experience gained from many governments over the past decade is that they can withstand only short-term situations and the sufficient consideration is not given to the assessing of the long-term implication or effectiveness of such programme and policies for the above reason, therefore, agricultural production contributes only a little tot the gross domestic product over the years. This actually has resulted in our importation of food especially in the late 1970’s and early 1980’s. the trend, however, changed with the introduction of the structural adjustment programme in 1986. Even the introduction of the second-Tier foreign exchange market also made the importation of goods very expensive as a result of the depreciation of the naira. This further resulted of food production and thereby intensified the need for local production to be increased.

One of the fundamental problems militating against the growth and development of agriculture in Sierra Leone is the shortage of credit (finance) to this sector despite central bank instructions.Agricultural development will only result with the process whereby farmers have to adopt new techniques and improve in their skill and efficiency in production. But for this to be possible, it entails that an average Sierra Leone farmer who operates on a relatively small scale must have access to credit facilities. The finance (credit) problems in Sierra Leone can be broadly categorized into: Availability and supply of credit o farmers. Not channeling or focusing of the funds to farmers that have the most effective demand for it.The non-productive utilization of funds due to lack of managerial skill and technical know how as a result of low education within the agricultural sector.

1.3  OBJECTIVE OF THE STUDY

Te major purposes of study of the central bank of Sierra Leone in credit supply to agricultural sector are as follows.

To determine the adequacy of credit supply to the  agricultural sector by the central bank of Sierra Leone guidelines.

To identify the extent to which the agricultural credit guarantee scheme has contributed to the financing of agricultural programes in Sierra Leone.

To ascertain the influence of the central bank of Sierra Leone sectorial allocation of the supply of finances to agriculture.

To determine the extent to which the Sierra Leone Agricultural and co-operative bank has contributed to the financing of agricultural projects in Sierra Leone.

To highlight the factors that militates against credit supply to agriculture.

To make workable recommendations which will enhance the flow of more fund to the agricultural sector.

1.4  SIGNIFICANCE OF THE STUDY:

The significance of this study will only be meaningful with some indication of its value for other in the immense benefit to the following:

The central bank of Sierra Leone

The commercial and merchant banks

The farmers

The Sierra Leonen economy

THE CENTRAL BANK OF Sierra Leone

The central bank of Sierra Leone will only benefit from this study in the sense that the reasonable suggested ways through which compliance to agricultural credit guidelines could be achieved. This actually will help central bank of Sierra Leone achieve their objective adequate credit supply to the agricultural sector.

THE COMMERCIAL AND MERCHANT BANS

The research work on credit supply to agriculture will also be of benefit to the commercial and merchant banks because they will have no cause to deposit any amount with the central bank of Sierra Leone as short fall of the credit supply the were supposed to channel to the agricultural sector as shown by the central bank of Sierra Leone policy guidelines.

THE FARMERS

The farmers will also benefit very well from this work if the recommendation and suggestions given are being seen to, by the commercial bank especially and the central bank. There will be sufficient fund made available to farmers to help them grow by acquiring more farm tools, equipment and other farming inputs. This will of course lead to an increased production of agricultural products.

THE SIERRA LEONE ECONOMY

The Sierra Leonen economy will also benefit from this work because if the commercial banks, the central bank adhere to the recommendations and suggestions, more fund will be released to he population. This will also help in exportation of some agricultural products that will earn foreign reserve for the country.

1.5  SCOPE AND LIMITATION OF THE STUDY SCOPE

A thorough study of the role of the central bank of Sierra Leone (BSL) in credit supply to agriculture was made in this work. This work focuses more on the help given so far by the central bank together with commercial banks and merchant banks to the development of agricultural sector in Sierra Leone.

LIMITATIONS

The limitation faced in this course of this study faced or caused some constraints, which is some ways affected the quality and quantity of the study The problems of finances was being encounter, with insufficient money to meet up all the costs of the works carried out which include traveling to various places for materials. The limitations of time also enable the work to be properly carried out at the in-depth study of the topics, the lecture period and other academic obligations were there to be attended to.

1.6  DEFINITIONS OF TERMS

1.  ACGS  Agricultural credit guarantee

3.  BSL  Central bank of Sierra Leone

4. CREDIT Money advanced lent to somebody, which is repayable over an agreed period of time after the borrower must have met certain conditions of the lender.