Declarations by the President of the Liberia Bank for Development and Industry(LBDI), John B. S. Davies III, that the bank shall, in 2019, focus its lending to the manufacturing and agriculture sectors, is indeed welcoming as such has the potential to promote the formation of indigenous capital.
This observation is based on the simple fact that the majority of the country’s population live in rural areas where at least 70 percent of the population is involved in subsistence production of agricultural commodities particularly the nation’s staple, rice.
It is worth noting that with the exception of a few commercial banks which have operations or branches outside the capital in select rural areas, most commercial banks in Liberia are situated right in the country’s capital, Monrovia. As it stands thus, large parts of the country remain without financial services.
Further, although about 70 percent of the population is rural based and is involved in agricultural production, financial credit to the agriculture sector remains dismally poor. According to the Central Bank of Liberia, at the end of December 2014, agriculture accounted for a mere 7.1 percent of total credit in the economy.
And similarly was credit to the manufacturing sector which accounted for a tiny 6.8 percent of total credit to the manufacturing sector. In contrast, credit to the service sector which includes restaurants, hotels, gas stations etc, accounted for a whopping 68.4 percent of total credit from the commercial banks.
Further, allocation to agriculture in the 2018-2019 budget is a tiny US$2.78 million and is focused mainly on rice value chain production and development of improved varieties and seeds of basic cash crops. If indeed agriculture is the bedrock of the Liberian economy, as is often proclaimed by public officials, then much more needs to be done to achieve that goal of self-sufficiency in food production.
According to a Central Bank of Liberia Working Paper No. 02/2017, (author –Jackson Worlobah) there is a need for integrated policy interventions promotive of economic diversification through value chain production.
This approach calls for providing incentives to lending institutions in order to enhance their ability to provide medium to long term credit to stimulate activities in the agricultural sector. In order to enhance the attainment of policy objectives using this approach, it is recommended that the relevant authorities put in place an incentive-based risk sharing arrangement in order to facilitate the process.
This newspaper is indeed gladdened by the LBDI’s pronounced policy shift particularly because it promises hope for relief from the burden imposed by hikes in the price of rice, which, by all accounts has become a political commodity. In making such a policy shift, the LBDI should explore all possible options that would serve to enhance the achievement of food self-sufficiency, particularly rice.
This newspaper is however not unmindful of the potential opposition which such a policy shift may likely engender from the likes of entrenched corporate interests which appear unyielding and impervious to widespread public concerns about the price of rice and the monopoly control over its import by a few select business interests.
Further this newspaper stands convinced that a decrease in the price of rice will tend to reduce poverty. In the case of Liberia, as a World Bank study (Working Paper 4742) indicates, “because rice represents a large share of food consumption, any change in its price is likely to have a large impact on poverty”. The paper further states that “An increase in the price of rice will result in higher poverty in the country as a whole (even if some local producers will gain from this increase), while a reduction in price will reduce poverty”.
In this regard, a reduction in poverty could see more children enrolled in school and not dropping out early because their parents would generally be able to afford to keep them in school. Such a situation is more likely than not to contribute to human capital formation, an essential requirement for national growth and development.
As regards manufacturing, this newspaper holds the view that the country’s endowment with vast mineral wealth provides an opportunity for enterprising Liberians to work on adding value to commodities which are shipped out of the country without any value added.
For example local entrepreneurs with lending from the bank could for example become involved in the production of animal feed, manly for pigs, from rubber seeds and thus contribute to a robust animal husbandry industry. Likewise paint could be manufactured using latex produced right here in Liberia just as the late Liberian industrialist, Clarence Parker once did.
Also, lending to support the establishment of vegetable and fruit canneries by Liberian farmers will help revive the economy and build resilience. Liberia has abundant iron ore but lacks natural coal (anthracite or coke) to produce steel. However copying from the Malaysians who produce steel using charcoal from aged rubber trees to produce steel, perhaps such efforts could be replicated right here starting off with the production of cast iron for steel rods which could, in turn provide a big boost to the construction industry.
Without realizing it perhaps, LBDI’s President John Davies has opened a window of opportunity for enterprising Liberians to take advantage of. He has also with realizing perhaps, thrown a huge challenge to national policy makers to think out of the box and work on the development and introduction of appropriate policy options to guide investment in the areas of agriculture and manufacturing, particularly at the small and medium enterprise level.
In this, the Daily Observer is reminded of the saying that goes ”What man has done, man can still do”. The overriding objective of the Bank’s policy shift is, in the opinion of this newspaper, to transform Liberia for the better. LBDI’s President John Davies has sounded the call. The question is: Can we Liberians do it? Yes We Can!