The marketing agency of Cocoa in Ghana, Cocoabod, has unveiled a new funding model for cocoa purchases in the country.
Under this new model, global traders will be required to deposit at least 60% of the value of their forward contracts at the start of the season.
Also, a part of a trader’s deposit will be used to finance purchases from farmers through an existing deal with a licensed cocoa buying company (LBC). This way, traders will work alongside the LBCs by funding them to buy the cocoa while Cocoabod will function as an intermediary.
The new funding model will replace the old pre-export loan system financed by international banks. This system has been in place since 1992 and has placed some pressure on the Cedi. Ghana is the second largest producer of Cocoa after Ivory Coast. With this new funding model, Ghana is hoping to reduce dependence on external borrowing to finance the industry.
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In addition, it expects the new funding model to help save over $150 million in interest payments. This comes as the country reels from the huge interest rate of 8% on cocoa loans obtained last year.
It is also expected that the new funding model will cut Ghana’s dependency on external loans to finance the cocoa industry. Under this new model, traders will pay 60% deposit up front and balance the 40% when picking up the cocoa supply. This way, farmers will get access to their funds early while the government will not pay excess interest rates on loans from external banks.
This new funding model is considered a major development in the industry and could help boost productivity in the cocoa industry.
