The new Governor of the Bank of Ghana, Dr Abdul-Nashiru Issahaku, says the central bank is reviewing the uniform base rate model.
Speaking in his first public engagement at an SME Financing Fair in Accra, the Governor disclosed that the Bank of Ghana on its part was reviewing the uniform base rate model which was introduced as a guide for setting lending rates, in order to enhance transparency and uniformity in the way base rates of banks are quoted.
He also noted that new and creative financing modalities to complement traditional financing options for small and medium enterprises (SMEs), should be a matter of priority.
The Governor said the Bank of Ghana would continue initiatives to reduce the financing challenges of SMEs.
The central bank would also resume its monthly publication of the annual percentage rate (APR) of banks in order to provide more information to borrowers, he said.
Dr Issahaku emphasized the critical role of SMEs in sustaining economies and promoting economic growth and demand, and acknowledged that prioritizing SME development is therefore “critical for promoting inclusive economic growth.”
He noted however, that macroeconomic factors such as depreciation and inflation, as well as microeconomic factors like high ratio of non-performing loans and the associated risks of financing SMEs in general, affect the cost of credit.
“This underscores our commitment to stabilize the economy, which would have a direct effect on lowering the cost of financing.”
“The Bank’s emphasis over the years has been to build an appropriate credit infrastructure to support credit delivery, which would in turn help lower the ratio of impaired loans and address the risks in lending to SMEs. These include, the establishment of the collateral registry, licensing of Credit Reference Bureaus and the establishment of Commercial Courts,” he said.
The governor was optimistic that interest rates will decline with the ongoing fiscal consolidation programme.
“Going forward, the Bank of Ghana remains committed to promoting and scaling up real sector lending to boost growth. While focusing on ensuring stability of the economy, the Bank would continue to pursue policies that will contribute to growth by working with the banks to provide incentives and encourage lending to productive sectors of the economy, and most importantly for banks to lend at reasonable rates, especially to SMEs,” Dr Issahaku said.
By Emmanuel Odonkor