The President of the Ghana Union of Traders Association, Dr. Joseph Obeng has lamented the cost of borrowing in Ghana, which he said if not addressed by government as a matter of priority, will edge out Ghanaian businesses by their competitors.
Speaking on Eye on Port, the GUTA President said government should urgently compel the mainstream commercial banks to reduce loan rates, or risk having Ghanaian Businesses lose out in the competition when Africa commences its Free Market.
“Government has done a lot by bringing down the base rate but it is not trickling down on the commercial rates, and that is difficult for us to understand why the gap is too big,” he complained.
Dr. Obeng said the banks usually explain that the high interest rates are due to the higher risks associated with the failure of local business in honouring repayments of loans.
But he opined that such excuse is not tenable since it is the responsibility of banks to do the due diligence needed before loan disbursements.
He said if government fails to set in place a compelling mechanism for banks to apply flexible interest rates for businesses, it should consider the alternative of setting up parallel banks that would give out subsidized loans to support businesses.
“Government should, if possible introduce a parallel bank which would subsidize credit. So that we would be able to go into industries,” he urged.
Dr. Obeng opined that the intervention by government would alleviate the plight of businesses in financing their trade, and would go a long way to give local manufacturers the financial boost needed to augment production.
The seasoned trader explained that the “seeming banking crisis in 2018” coupled with the consequences of the COVID-19 pandemic have negatively affected many local traders making it the more justified for government to intervene with a drastic alleviation measure.
“Recent events have rendered many businesses challenged, and most of them are on the verge of bankruptcy,” he said.
“The stimulus package that was introduced by government which was originally intended for about 200,000 people, at the end of the day, over 850,000 people subscribed to it. It shows how much people need credit to do their business,” he added.
He lamented that currently, Ghanaians go as far as reaching out to their business partners and families overseas to access loans in such countries because of their lower rates.
He emphasized that with the advent of the Continental Free Trade Area, which is intended to promote the trading and consumption of locally produced goods, if the issue of the cost of borrowing is not addressed, the effort would be futile.
“If you import from outside, suppliers there are getting their credit for 3-5%, and here our credit cost is 23%. It means that Continental Free Trade or not, they have an advantage of about 20% to edge you out, even if duties are not demanded from you,” the GUTA President articulated.