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Business News of Tuesday, 1 November 2016


Ecobank emerges as best place to secure credit - BoG report

Ecobank has emerged as the best place for businesses and individuals to seek credit, in the latest Bank of Ghana (BoG) report.

That’s the conclusion one draws going through the Annual Percentage Rates (APR) and Average Interest Rate (AI) on deposit report, ending September 30.
APRs and AI are seen as the true cost of borrowing according to the Central Bank.

Ecobank according to the rankings, asked businesses in the Agriculture, Manufacturing, Commerce and Construction sector, to pay an APR of 19 to 29.3 percent, despite advertising a base rate of 26 percent.

This could mean that, depending on the project, collateral presented, some enterprises paid 19 percent, 23 percent, or 25 percent as APR on loans, whiles others could have paid as much as 29.3 percent.

For some analysts, Ecobank’s decision to give a range for their APRs might have done the trick, in beating other 28 commercial banks that were accessed in the report.

Standard Chartered Bank, for instance, offered an APR of 19.7 percent for businesses in the manufacturing sector, 20.7 percent for Construction, 21.7 percent for commence and 22.7 percent for businesses in the Agricultural sector.

However, that was still not enough to beat Ecobank’s range of APRs it gave in the ranking. Some have also argued that Standard Chartered Bank, could have shared the top spot with Ecobank or even secure the top spot.

Ecobank also emerged as the best institution for individuals, who bought vehicles, mortgage and other consumer credit to secure credit among the 29 banks assessed by the BoG in the rankings, as Ecobank again offered an APR of 19 to 29.3 percent.

On deposits, UT bank came up as the best institution offering the highest rate, as the bank offered an Average Interest Rate of 15.8 percent, beating other 28 banks assessed by the Central Bank in the rankings.

An average of all the 29 banks reviewed in the rankings showed that businesses were paying between 32.7 to 33.5 percent as interest. Individuals, on the other hand, paid between, 31.5 to 34.5 percent as interest on loans ending September 30.

The Central Bank maintains that it sees the regulator publication of this report as a means of driving down the cost of borrowing since none of the banks want to be seen as charging borrowers very high-interest rates.

However, some industry persons are raising questions about the report, because of the decision of some banks to give a range for their APRs and whiles other are reporting a single rate, which for them, makes it difficult to really difficult to assess, which institutions is offering the best rate on the market.

Some are also arguing that it is difficult to appreciate how some banks are offering rates far below their base rates as well as Treasury bill rate, which is now around between 22 to 23 percent.

Some financial analysts have told JOYBUSINESS that one of the surest ways to reduce the cost of credit is a deal with the rate at which government borrows from the commercial banks, through its treasury bills.