Banks adopt new strategies to provide cheaper loans to SMEs

Commercial banks have started exploring innovative ways to provide loans to Ghanaian Small and Medium-sized Enterprises (SMEs) at single digit interest rates.

This is to cushion SMEs that are adversely impacted by high-interest rate regime in the country, and support their growth and expansion, while contributing to the country’s development.

This came to the fore at a forum held in Accra, on Thursday, August 1, on the back of a presentation of research finding by Dr Richmond Odartey Lamptey of the Cardiff Metropolitan University.

It was on the theme: “Financing and enabling resilience of women businesses during turbulent times in Ghana: multi-stakeholder perspective.”

Access, Zenith, and Stanbic banks have formed partnerships with the Development Bank Ghana (DGB) and the Mastercard Foundation, and lending to agriculture and agro-processing businesses and manufacturing firms with such arrangement.

Speaking with the Ghana News Agency, Dr Kweku Arthur-Annobil, Manager, Business Stategy, Stanbic Bank, said the initiative was inspired by the need to support SME growth and resilience amid the present economic crisis.

“The Monetary Policy Rate of the Bank of Ghana (BoG) rose to about 30 per cent and has now reduced to 29 per cent… and with this rate, banks will be lending to them around 40 per cent interest rate,” he noted.

“So, every bank is aggressively partnering with development finance institutions to get these cheaper sources of funds for these businesses. Without that they can’t survive,” Dr Arthur-Annobil said.

He noted that turbulent times often were not a one-off event, as such it was important for businesses to build their capacity to withstand them.

He encouraged SMEs to separate their personal finances from that of their businesses, and adopt digital means, including delivery systems to expand the business and reach wider customers.

Ms Gloria Fafa Cabutey-Adodoadji, Head of SME and Retail Banking, Zenith Bank Ghana Limited, underscored the relevance of SMEs in Ghana’s economic growth, indicating the Bank’s commitment to supporting such businesses.

Addressing the concern of banks’ challenge in providing funds to SMEs, she said the situation was due to the inability of such businesses to repay their loans, increasing banks’ non-performing loans.

She advised SMEs, especially those owned by women, to have good bookkeeping habit, formalise their operations with the Registrar of Companies, and make their businesses profitable to repay loans.

That way, banks would not find it difficult to lend to them, Cabutey-Adodoadji said, and encouraged small businesses to grow and trade under the African Continental Free Trade Area (AfCFTA) initiative.

Ms Josephine Eva Arthur, Zonal Head, Retail Banking, Access Bank Ghana PLC, asked women business owners to shop around banks to know the solutions that had been designed to meet their needs, including the single digit loan initiative.

She noted that the Bank, through its women-centred initiative, had provided opportunities for SMEs to across 14 African countries.

She urged businesses to prioritise customer service, including having a database to track doing business with them, and look for avenues to empower themselves, like technical assistance provided by the Ghana Enterprises Agency (GEA).

Dr Lamptey who collected data from businesses in Accra, Tema, and Koforidua, found that cultural, and institutional barriers hindered the access to funds of women businesses, especially during turbulent times.

He noted that women businesses were often seen as risky and without collateral to meet loan requirements, affecting their ability to access loans from commercial banks.

He urged banks to see those challenges as opportunities, and support them to grow and expand, which would have transformational impact on the economy at large.