An Examination into Cocoa Financing in Ghana: the Case of Armajaro Ghana Limited).
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Date
2008-06-08
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Abstract
Finance is needed throughout a company’s life. The type and amount of finance required for a business depends on many factors: type of business, success of firm and state of the economy.
Cocoa is the most important export crop and remains the highest foreign exchange earner for Ghana contributing an average of 3.4% to the total GDP annually. Due to its quality, Ghana’s cocoa has been the benchmark under which cocoa from other countries are sold. This quality of Ghana’s cocoa has been earning the country good price and premium which no other cocoa producing country enjoys. Since the 1993/1994 crop season, Ghana Cocoa Board has raised offshore loans in US$ from a consortium of banks to finance the local purchases of cocoa. The Cocoa Marketing Company (CMC) pledges cocoa sales contracts as collateral for such loans.
The overall objective of this study was to examine the various sources of finance available to Ghana Cocoa Board and LBCs and come out with the most frequently used source of finance. Explanatory research design was used, with systematic, convenient and simple random sampling technique to collect the necessary data.
The findings show that both Ghana Cocoa Board and LBCs consider various factors such as availability of funds, speed, collateral and conditions as well as flexibility before choosing a source of finance. Also Cocobod and LBCs face some few problems such as high cost of finance, risk in terms of foreign exchange differences and marketing of the yield, speed in releasing funds and bureaucracy. The study recommends that there should be full liberalization of the marketing of cocoa, government interference within the affairs of Cocobod should be reduced, float shares to the public and also negotiate for relaxed collateral and other conditions. On the part of LBCs, it is recommended that LBCs should have access to sources of finance outside the country, combine other sources of finance such as floating shares to the public.
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A Thesis submitted to the School of Business Studies of Kwame Nkrumah University of Science and Technology and in partial fulfillment of the requirements for the degree of
Masters in Business Administration, 2008