THE recent appeal by the Bank of Ghana (BOG) Governor, Dr Johnson Asiama, for commercial banks to channel more credit to the real sector following the reduction of the policy rate to 18 per cent brings back an old but unresolved issue in Ghana’s financial system.
For years, Small and Medium-sized Enterprises(SMEs) have been described as the backbone of the economy, yet they remain chronically starved of affordable credit.
The policy rate cut is meant to ease borrowing conditions, but unless it translates into real lending, its impact will be limited.
In theory, a lower policy rate should reduce the cost of funds and encourage banks to lend more to productive sectors.
In practice, Ghana’s SMEs continue to face high interest rates, short loan tenors and strict collateral demands.
Many banks still prefer to invest in government securities or lend to low-risk corporate clients, where returns are predictable and recovery risks are minimal. The result is a financial system that supports balance sheets but does little to expand production, jobs and value creation.
The Governor’s call is,therefore, timely, but it also exposes the structural disconnect between monetary policy and credit delivery.
Monetary easing alone cannot force banks to lend to SMEs if the underlying risks remain high.
Weak financial records, informality, poor cash-flow management and limited credit histories make many small businesses unattractive to lenders.
At the same time, banks argue that rising non-performing loans and regulatory pressures constrain their risk appetite. Both sides have valid concerns, but the economy cannot grow if credit avoids the sectors that actually produce goods and services.
If the policy rate cut is to matter, it must be supported by complementary measures. Credit guarantee schemes, risk-sharing frameworks, and improved credit information systems can reduce banks’ exposure and encourage lending to SMEs.
Development finance institutions also have a role to play in crowding in private banks rather than competing with them.
On their part, SMEs must improve governance, bookkeeping and transparency to become bankable.
Access to credit is not only a policy issue, it is also a business discipline issue.
Ultimately, the success of the 18 per cent policy rate will not be measured by stability in the interbank market, but by activity on factory floors, farms, workshops and trading centres.
If banks respond positively to the Governor’s appeal, Ghana could see stronger growth driven by local enterprise.
If not, the gap between policy intent and economic reality will persist, leaving SMEs once again at the margins of the financial system.
Source:
www.graphic.com.gh
