You are here: HomeBusiness2021 08 21Article 1338070

Business News of Saturday, 21 August 2021

Source: thebftonline.com

'Banks’ short-term lending attitude needs to change for industry’s good' - Osafo-Maafo

Senior Presidential Advisor, Yaw Osafo-Maafo play videoSenior Presidential Advisor, Yaw Osafo-Maafo

Although the banking sector clean-up was meant to change the orientation of banks from short-term lending to long-term, that has yet to happen and Yaw Osafo-Maafo, Senior Presidential Advisor, notes that this attitude is hurting the manufacturing sector and needs to change if the country is to take full advantage of the continental free trade area.

Currently, less than 15 percent of loans given out by banks are for five years or longer, according to the Ministry of Finance. More worryingly, agriculture and manufacturing sectors, two of the main components of the government’s economic transformation agenda, receive 4 and 8 percent respectively of banks loans compared to their share of GDP and employment and potential for job creation.

“Short-term lending is the icing on the cake for banks,” he said, adding that government recognises the challenges of medium to long-term capital and is working around the clock to ease the credit crunch situation within the economy.

Mr. Osafo-Maafo spoke in Accra at the Ghana Industrial Summit and Exhibition 2021, a three-day event organised by the Association of Ghana Industries (AGI) and said industry, typically requires capital with longer gestation period and priced at reasonable rate.

He, however, said this type of capital was currently not available on the market, hence the government’s resolve to set up a new lender, Development Bank Ghana, to finance the country’s industrialisation agenda.

The new development bank, expected to be operational by year end, would not be allowed to take deposits and will be able to lend to manufacturers for up to a period of 15 years.

This, according to market watchers, including the AGI, a body comprising the country’s leading producers, could be the final piece of the puzzle needed to spur Ghana’s industrial potential, especially as trading has officially begun on the continental free trade area

“We are anxious to see the full roll out of government’s support and the establishment of the new Development Bank Ghana,” AGI’s President, Dr. Yaw Adu Gyamfi, said.

He added that a number of industries were already under-capitalised, and the impact of COVID-19 further precipitates the need for urgent finance to resuscitate some of the worst hit sectors.