Dr. Abdul-Nashiru Issahaku, Governor of the Bank of Ghana (BoG), has urged banks to revise and develop new banking solutions and models to better serve Small and Medium-scale Enterprises (SMEs).
He said prioritizing SMEs’ development is critical for promoting inclusive economic growth because they stimulate domestic demand through job creation, innovation and competition.
Dr. Issahaku, who was speaking at the opening of this year’s SME Financing Fair in Accra yesterday, said SMEs are often a driving force behind any resilient national economy, reiterating the commitment of the Central Bank to supporting SMEs to thrive.
On the specific issue about the cost of SME financing, he said there are two broad factors that often influence issues.
“The first includes macroeconomic conditions such as rising inflation and depreciation of the cedi. The second include microeconomic factors such as high non-performing loans and risks associated with financing SMEs in general. This underscores our commitment to stabilize the economy which would have a direct effect on lowering the cost of financing.”
Reducing Cost of Funding
Touching on how to reduce the cost of financing, Dr. Issahaku said the uniform base rate model that was earlier introduced as a guide to all banks in a bid to improve the framework within which they set their lending rates is currently being reviewed.
“The revised framework should result in more transparency and uniformity in the way base rates of banks are quoted. We will also resume the monthly publication of the Annual Percentage Rate (or APR) of banks to provide more information to the borrowing public,” he said.
Going forward, Dr. Issahaku said the Central Bank 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,” he said.