THE Minister of Business Development, Dr Ibrahim Mohammed Awal, has indicated that the government will not relent in its quest to get the commercial banks to reduce their interest rate to at least 18 per cent in accordance with the relative gains made in some major macroeconomic indicators.
Achieving this, he explained, would enable businesses in the country to have cheaper sources of funds to enhance their operations.
At a signing ceremony for a partnership between a Ghanaian company, Lych Capital, and the Corlido Group from Netherlands on July 10, in Accra, Dr Awal said the government would do everything possible to ensure the banks reduced their rates for businesses to grow.
Commercial banks in the country have refused to reduce their lending rate to correspond with the central bank’s base rate which is currently at 18 per cent.
Most of the banks charge over 30 per cent on money borrowed, a figure that has been described as one of the highest in the West African sub-region. Also, the introduction of the reference rate is yet to have any significant impact on the current rates.
Several calls by the business community, especially the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce and Industry (GNCCI), for a reduction in the rates to enable businesses to access credit to finance and expand their operations have not yielded much results.
High interest rate
Dr Awal observed that the high interest rate was a major setback for government’s vision to change the structure of the country’s economy from an import led to an export-oriented economy.
He said only a private sector led industrial development (with mutual support from the government) would accelerate and deliver the required transformation of the Ghanaian economy.
He indicated that the government was on an aggressive plan to transform the country’s economy.
Taking the audience through the plans of the government to shift the economy from commodity based to industrialisation, the minister also called on the banks to partner the government in some of the projects.
In a contrary view, the former Managing Director (MD) of ADB Bank, Mr Daniel Asiedu, jumped to the defence of universal banks maintaining their rates amid consistent drop in the policy rate.
He said the banks only served an intermediary role and, therefore, could not reduce the rates unless the cost of funds accessed by financial institutions were reduced.
“The funds are not for the banks and so if the rates are low from where they are taking the funds, then they can reduce their lending when giving the funds out. People give money to the banks and they want high interest on them. The treasury rate is also a determinant and so if it is high and the banks add their margin then the rate goes up,” he said.
Mr Asiedu explained that although the rates were dropped marginally once in a while, the borrowing public was not satisfied and sometimes complained but the banks had no option.
“The thinking is that the banks can push and bring it down, but no bank wants to operate at a loss. Everybody, including the central bank and the government, must collaborate to ensure that the rates further reduces,” he added. — GB