2nd Dep. Governor urges banks to cut lending rates
The Bank of Ghana (BoG) has called on commercial banks to reduce lending rates as the country’s macroeconomic indicators, such as inflation, continue to improve. Speaking at the launch of a collaboration between Absa Bank and the Mastercard Foundation to provide loans to small-scale businesses at a rate of 10%, Elsie Addo Awadzi, the Second Deputy Governor of the Bank, stated that inflation has consistently dropped since the beginning of the year to 41.2%, indicating a positive trend in the economy.
Encouraging banks to lend more to the private sector to support growth, Awadzi noted that the sector has become more liquid and is capable of withstanding economic challenges. She expressed the hope that lending rates would come down as the economy picks up and the inflation rate continues to drop.
Rossy Fynn, the Country Manager for Mastercard Foundation, announced that the foundation plans to introduce innovative products to support small businesses, particularly those focused on sustainable and green initiatives. Abena Osei Opoku, the Managing Director for Absa Bank, reassured attendees that the bank would remain the best choice for SME lending and added that the plan for the SME loan at a 10% rate was to reach out to more than 5,000 small businesses and help them become investor-ready.
Small and Micro Enterprises are the backbone of the Ghanaian economy, according to Awadzi. She called for more lending to the sector at lower rates to enable Ghanaian businesses to compete effectively, particularly in light of the Africa Continental Free Trade Agreement. By lending at reduced rates, commercial banks could support the country’s economic growth and help to create jobs for the unemployed.
The call by the BoG for banks to reduce lending rates is consistent with the government’s efforts to promote economic growth by making credit available to businesses at reasonable rates. The high cost of credit has been a major impediment to the growth of businesses in Ghana. By reducing lending rates, commercial banks can facilitate investment and provide small businesses with the financing they need to expand their operations.
