Afede: High interest rates destroying industries

Board Chairman of the World Trade Centre (WTC), Togbe Afede XIV has said the high interest rates regime in the country is strangling industries.

According to him, the galloping interest rates regime could deal a damning blow to the manufacturing industry if not reined in.

Speaking at the 45th Godigbe festival at Aflao in the Volta Region at the weekend, the traditional leader and businessman said: “Borrowing at 30 percent is never a viable means of funding a company.”

“No wonder we see a manufacturing sector being destroyed while the likes of banking and the others which would employ less people rather make all the profit,” the Chief added.

Small and Medium scale Enterprises (SMEs) have had cause to complain endlessly about the high interest rates charged by banks on borrowing.

The Banks also defend the practice by arguing that the high risk involved in lending to such businesses informs the decision of interest rates charged.

Togbe Afede’s concerns follow similar concerns raised by Ministry of Trade and Industry Ekwow Spio-Garbrah recently.

He said his Office has begun discussions with the Central Bank and other stakeholders to help the situation.

Spio-Garbrah was speaking at a breakfast meeting jointly organised by Graphic Business and Fidelity Bank to discuss how SMEs can contribute to economic development.

He mentioned that the high interest rates were having an adverse effect on businesses and added that the disparity between savings and lending rates is the reason for high interest rates in the country.

“There are very few countries in the world where the spread between savings rate and lending rate is about 20%. That is where the problem is. That is why we have a very low savings to GDP ratio in Ghana.

“Most people do not save because there is no benefit to savings. About 28 banks and yet, savings rate is below 5%. If you make a mistake and put dollars that you have in the bank that is zero.”