Interest on GH¢600m loan will make beneficiaries spend with caution – Financial Analyst

Lecturer at the Finance Department of the University of Ghana Business School, Dr Lord Mensah, says the interest rate placed on the 600 million cedis stimulus package for SMEs affected by coronavirus is plausible.

His comment comes after government indicated that beneficiaries of the stimulus facility will be required to pay a 5 percent interest on the principal amount.

Speaking to GhanaWeb, Dr. Lord Mensah said the interest on stimulus package will make beneficiaries circumspect about their spending.

“If SME’s are getting these monies without any interest payments, the value that they will place on it will be minimal. It is good for beneficiaries because stimulus package does not necessary mean free money. When there is an interest rate attached to it, businesses owners will be circumspect about their spending.”

Government on the other must be able to be accountable for the disbursement of that financial assistance, he added.

On whether or not the 5 percent interest rate was business friendly, he said “if you look at the structure of interest rate in Ghana, clearly a typical bank loan will go for about let’s say between 24 to 30 percent.

“The fact that it is a stimulus package does not mean it should be free. In other parts of the world, they could be paying 1 percent because other structures of their interest rate. In our part of the environment the 5 percent is quite ok. Source for funds in this country are quite high.”

600 million cedis stimulus package

President Nana Addo Dankwa Akufo-Addo, during an address to the nation, said his government, in collaboration with the National Board for Small Scale Industries (NBSSI), Business & Trade Associations and selected Commercial and Rural Banks, will roll out a soft loan scheme up to a total of six hundred million cedis (GH¢600 million).

The facility will have a one-year moratorium and two-year repayment period for micro, small and medium scale businesses.

Industries expected to enjoy this facility includes pharmaceuticals, agribusiness, hospitality, education, textile industry and manufacturing.

The package is set to be launched this week by President Nana Addo Dankwa Akufo Addo.