The Bank of Ghana (BoG) is working with the African Development Bank (AfDB) and other development finance institutions to mobilise specialised and long-term financing to support businesses under the government’s 24-hour economy agenda.
The Governor of the BoG, Dr Johnson Pandit Asiama, said the central bank was also collaborating with capital market actors, such as the Ghana Stock Exchange and the National Pensions Regulatory Authority (NPRA), to increase access to longer-term funding for businesses undertaking major investments.
He was speaking at a Bono Regional stakeholder engagement of the BoG with members of the Association of Ghana Industries (AGI) in Sunyani last Wednesday.
Financing
Dr Asiama said the initiative aimed to address the shortage of long-term financing, particularly for businesses that required several years to establish production capacity before generating returns.
He said the BoG did not have the resources to provide grants directly to businesses but was facilitating access to specialised lending facilities offered by institutions for the 24-hour economy.
The Governor said the Ghana International Bank (GHIB), a BoG subsidiary in London, was also engaging some institutions to secure grants and lending resources that could be made available to the 24-hour economy secretariat.
He said the central bank was encouraging banks to provide loans with longer repayment periods and moratoriums to businesses whose projects required substantial time to establish.
The Governor cited cashew processing as an example, saying importing and installing machinery could take about two years, making conventional short-term loans unsuitable for such investments.
Credit growth
Dr Asiama said credit to businesses and households grew by more than 41 per cent in June this year, compared with about nine per cent a year earlier.
He said the development reflected increased lending by banks to the private sector, with more businesses and households gaining access to financing to expand, create jobs and contribute to economic growth.
The Governor said lending rates had fallen from levels above 31 per cent in previous years to generally between 15 per cent and 16 per cent, with some very good borrowers accessing rates of about 10 per cent and 11 per cent.
Dr Asiama, however, said longer term lending remained scarce, hence the work with other partners to make longer-term resources available to banks, adding that economic conditions had been favourable to support such an intervention.
AGI concerns
The Bono Regional Chairman of the AGI, Ernest Tetteh, said the 24-hour economy policy required more than conventional bank loans, given the rigid collateral regime and stringent conditions businesses faced in accessing credit.
He called for grant schemes and incentives to support key areas of industry and help make the 24-hour economy agenda a reality.
Microfinance reforms
The Head of the Financial Institutions Supervision Department of the BoG, Desmond Agbogah, said the BoG and the Ministry of Finance were further restructuring the microfinance sector following the financial sector clean-up between 2017 and 2019.
He said savings and loans companies, finance houses and well capitalised microfinance institutions would be classified as microfinance banks, while rural banks had become community banks.
Mr Agbogah said credit unions, which were previously not supervised by the BoG, would also come under its supervision, while smaller operators, including microcredit and susu enterprises, would be placed under a category of smaller providers.
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