Give us the confidence to lend to SMEs – Ken Thompson to government
Chief Executive Officer (CEO) of Dalex Finance, Ken Thompson, has called on government to put in place the requisite infrastructure that gives financial institutions confidence in lending to the private sector – particularly small and medium-sized enterprises in the country.
According to Mr Thompson, financial institutions in Ghana are ready and willing to lend to the private sector but are unable to do so due to the fact that there are no ‘incentives’ for businesses to repay loans.
“If you have a business you need to be able to borrow, why do we not lend to SMEs, I don’t lend to SMEs because I don’t know them, when they default and you take the case to court we can be in court for 5, 6 or 7 years.
“If I know them [SMEs] and know that if I go to the court, the court can get me justice and have my agreement looked at in matter of a month then we will lend to the private sector,” he stated speaking in an interview with NorvanReports.
“I want our judges and lawyers to be rich, let’s the court sit 24/7 and let them dispatch cases expeditiously.
“Government should get its credit database sorted and get everyone on Ghana card linked to everything they do, and then we the private sector can borrow to lend because if people come to me and I am know them, I will go and borrow and lend to them because I know that if they don’t pay I will get it back or I shut them down.
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“Create the infrastructure to give us the confidence to borrow and lend, that’s all we are asking for,” he added.
Making a similar assertion some months ago at the 10th edition of the Business and Financial Times Ghana Economic Forum (GEF), Mr Thompson noted measures to facilitate funding of SMEs by financial institutions could help to significantly increase the country’s consumer debt to GDP ratio (approximately 19%) by an additional 20%.
According to him, neighbouring country such as Togo, Ivory Coast and the Gambia have higher consumer debt to GDP ratios and South Africa is doing over 100%. With a GDP of approximately $60bn, additional lending to the private sector could increase by $12bn.
Meanwhile, private sector credit growth according to the Bank of Ghana (BoG) is yet to fully recover to pre-pandemic levels.
Annual nominal growth in private sector credit, the Governor noted, slowed to 9.5 percent in August 2021 compared with 14.3 percent, in the corresponding period of 2020.
Similarly, real private sector credit contracted marginally by 0.1 percent compared to a growth of 3.4 percent, recorded over the same comparative period.
Also contributing to the private sector’s credit slow recovery from the pandemic is the crowding out of the private sector by government as government tends to borrow more from commercial banks and the banks in turn prefer to lend to government given that loans made to the state are risk-free.
