The Ghana Chamber of Commerce and Industry (GNCCI) has highlighted the urgent need to finance the private sector to stimulate economic growth.
He said this was particularly important given the current dominance of government borrowing in the financial landscape.
CEO of the chamber, Mark Badu-Aboagye urged banks to conduct comprehensive risk analyses to ensure their funding effectively supports viable private sector initiatives.
“If you want to do proper banking, give money to the private sector. You need to assess their profile, their credit readiness, and their project viability. You follow up, monitor, and get your money back,” Mr Badu-Aboagye stated.
He explained that the current dominance of government borrowing reduces the incentive for banks to lend to the private sector.
“If the government decides it’s not borrowing as much, the money sitting with the banks will compel them to give it to the private sector,” he said.
However, Mr. Badu-Aboagye recognized the challenges banks encounter when lending to businesses, particularly small and medium-sized enterprises (SMEs).
He pointed out that high interest rates complicate borrowing for SMEs, which already operate on slim profit margins.
“SMEs want money. Our economy depends on SMEs. Try getting money as an SME, and they give you 30% interest. How do you expect an SME to borrow at 30-40%, make a profit, and also pay you back?” he questioned.
He noted that while businesses in Ghana are generally productive and profitable, external factors like high interest rates and a challenging business environment are pushing them into losses.
“At the micro level, businesses are productive. It’s when you bring in interest rates and taxes that they start running at a loss,” he concluded.