Director General of the Securities and Exchange Commission (SEC), Dr. Adu Anane Antwi, has advised businesses to prioritise the capital market in raising long-term finance for their business instead of relying on banks for such ventures.

“I want businesses to see banks as short-term financiers and not long-term, because banks traditionally are meant to lend in the short-term not long-term even though they try to work out extending long-term facilities -- meanwhile, technically and traditionally, that is not their function.

“The capital market is there because the banks are supposed to give you short-term funding since customers also put their monies there on short-term basis,” he said.

Making a strong case for the capital market in the face of heightened interest in the Ghana Alternative Exchange (GAX), Dr. Antwi said the capital market gives businesses long-term funds for stability and growth.

He noted businesses should go to the bank when they are targetting a project that cannot delay in giving them their returns, so they can also return the bank’s money to them.

“You can’t go to the bank to build a factory. If you rely on short-term loans to finance a long-term project then you have a problem, and that is why defaults are very high nowadays. People go for short-term finance to undertake long-term projects. There are some loans that have been on the books of banks for 10 years.

“Why should you take a one-year loan to finance a 10-year project? Come to the capital market, issue bonds for as long as you want -- or take equity where you don’t have a lifespan -- and all you do is pay dividends; and even if you don’t have the dividends and can explain to shareholders that there is a better use for the money and they will get better value while it is retained, then they will understand and allow you to continue.

Then you have some patient capital which will let you go through all that you are going through,” he stated.

He added that no nation can operate and develop with short-term funds. “How can you take a one-year facility to build a dam? You need about 10, 15 or 20-year bonds to undertake that project.”

As a result of high interest rates on credit from banks, customers have defaulted on loans they have taken, which has seen a surge in the non-performing loans of banks.

The increment has seen banks tighten their risk assessments, with some bankers conceding that they will reduce the amount of credit given to individuals and businesses -- with most of them looking at investing in government securities, which are risk-free.