BoG to help de-risk lending to MSMEs and women-owned businesses – 2nd Dep. Governor
Second Deputy of the Bank of Ghana, Elsie Awadzi-Addo, has said the Bank of Ghana (BoG) will help to de-risk lending to MSMEs and women-owned businesses in the country.
This, she noted, will be done by enhancing the critical credit market infrastructure such as the credit bureaux-based credit reporting system as well as the Bank’s collateral register.
Making the assertion at the First + Gender Finance Workshop organised by Ghana Microfinance Institutions Network (GHAMFIN) and CapPlus, the Second Deputy Governor noted that, this forms part of the many measures the BoG intends to do to promote access to an inclusive financial system and by extension, broad-based macroeconomic growth through its policy, regulatory and supervisory tools.
Adding that the Bank will help promote safety and soundness of financial institutions it regulates so that they are better able to provide finance to economic actors on a sustainable basis.
Aside enhancing the credit market infrastructure to help de-risk lending to MSMEs and women-owned businesses, other regulatory and supervisory tools the BoG intends to implement include:
- Monitor the implementation of Ghana’s Sustainable Banking Principles – a set of seven ESG –related principles launched in November 2019 by the Bank of Ghana, Ghana Association of Banks, and the Environmental Protection Agency – which enjoins banks to among other things, promote financial inclusion and gender equity internally and in relation to their products and services to clients. Banks are currently reporting regularly to us on progress they are making in implementing these principles, and we expect that soon specialised deposit taking institutions and non-bank financial institutions we regulate and supervise will follow suit.
- Implement a new online reporting and analytics supervisory tool by which our regulated financial institutions submit their prudential returns to us on a monthly basis. This new online tool, requires reporting on a sex-disaggregated basis, and allows both reporting institutions and our supervision staff to understand not only aggregate numbers in terms of financial products and services but also the gender dynamics of the customer bases and product and service offerings of financial institutions. This should help address current data constraints and provide critical data for evidence-based design of financial services and products and for policy making, regulation, and supervision.
- Ensure that our regulation of the payments space is supportive of innovation and inclusion by allowing fintechs and other payments system service providers to partner with banks and other licensed financial institutions to provide products and services that promote convenience, cost effectiveness, and inclusion.
- Promote the safety and soundness of financial institutions we regulate so that they are better able to provide finance to economic actors on a sustainable basis. Weak financial institutions are not able to support the private sector through funding.
Access to finance for Micro, Small and Medium Enterprises remains a perennial challenge and most surveys including the Bank of Ghana business environment surveys confirm this. Women-owned MSMEs also face an even higher bar to accessing finance.
As of 2017, the World Bank’s Findex Report suggested that there was an 8% gender gap in access to finance in Ghana, and an average of 9% for Africa.
The Second Deputy Governor said the First + initiative is therefore timely and urgent, as part of efforts to help our economy recover from the pandemic and make it more resilient going forward.
“As this initiative focuses on the supply-side of access to finance by aiming to empower financial institutions to provide more products and services for MSMEs in a gender inclusive manner, it is important to understand what the constraints have been for our financial institutions beyond the sources of funding available to them, and how this initiative can address those constraints fully.”
“In addition, we need to also think about what the demand-side constraints have been, so that we can somehow address them to promote effective take-up of gender-inclusive MSME-focused products and services”, she noted.
MSMEs are the bedrock of the Ghanaian economy, and women entrepreneurs own a majority of MSMEs.
Data suggests that Ghana’s MSME sector accounts for about 92 percent of all businesses and contributes about 70 percent of Ghana’s GDP. Ghana’s private sector is dominated by women entrepreneurs, second only to Uganda, according to the 2019 MasterCard Index of Women Entrepreneurs.