President Nana Akufo-Addo has urged banks and other financial institutions to support government’s efforts to boost the economy and support local businesses through providing affordable long-term credit.
“The major challenge to local businesses in our space remains access to capital, largely due to the high interest rates. The banks must support government as we work together on supporting industry to get affordable long-term capital for long-term investments that ensure sustainability.
“The current rates are too high in comparison with our next-door neighbours and other competitors across the continent. We need banks to consider innovative ways through which they can reduce lending costs to businesses,” the president urged.
The president made these remarks at GCB Bank PLC’s Platinum Anniversary Gala and Awards Night held in Accra.
In light of the prevailing economic conditions, businesses face a multitude of challenges; including limited cash flow, increased operational costs and restricted access to capital. These impediments hinder their ability to invest, expand and innovate – essential components for a flourishing business environment.
However, to counter these obstacles the president said banks should play an active role in providing affordable credit solutions that address the unique financial circumstances of businesses.
While reiterating his government’s commitment to creating an enabling environment, he noted that access to cost-effective credit will enable the private sector to drive economic growth.
Admittedly, he said, the cost of borrowing – at above 30 percent – is too high compared to other regional peers such as Ivory Coast, Nigeria, South Africa, Rwanda and Togo, among others. The prevailing rate, the president said, serves as a disincentive.
Government, he added, recognise the vital role small and medium scale enterprises (SMEs) and large enterprises play in nation-building, despite the difficult operating environment.
“Government is committed to creating an enabling environment for businesses to thrive, and believes that financial institutions have a pivotal role to play in achieving this objective. By working in tandem, government and banks can nurture a resilient business ecosystem, bolster economic growth and pave the way for a prosperous future,” he said.
GCB MD
The Managing Director-GCB Bank, Kofi Adomakoh, touching on the president’s plea, acknowledged that indeed Ghana has one of the highest lending rates on the continent. He however explained that the rate at which banks lend is influenced by multiple factors, some of which are beyond banks’ control – believing that once government steps in to address the external factors, lower lending rates can be achieved.
“The president is right; if you want to build strong businesses and industries, interest rates have to be down – the interest rate is literally the cost of borrowing. However, interest rates are not determined by the banks; they are a function of risk and inflation. Therefore macro, fiscal and economic factors must work together in tandem to bring down inflation.
“We are also committed to lending to businesses at lower rates, and very confident that soon the macro factors will bring down inflation – as we have started seeing – so we can lend at lower rates,” he responded.
Affordable credit options will empower businesses to invest in infrastructure, research and development, human resources and technology; thereby driving economic growth and creating employment opportunities.
