Banks must seek innovative ways to lend – Osafo-Maafo

Senior Minister, Yaw Osafo-Maafo, has said the drop in 91 and 182-day Treasury Bill rates respectively, means that commercial banks have no other choice than to seek other ways of lending if they are to remain in business.

The rate on the 91-day Treasury bill, for instance, earlier this month hit 11.93 percent – the lowest in five years. According to the central bank’s May 2017 financial stability report, the bank’s investment in government’s bills and securities as at April stood at GH¢24.8 billion, a year-on-year growth of more than 57 percent.

Speaking in an interview with the B&FT ahead of next month’s Ghana Economic Forum (GEF 2017), Mr. Osafo-Maafo, the Senior Minister said, over the years commercial banks have found government’s bills and securities to be a safe haven for their investments and are reluctant to lend to the private sector to support growth.

“They will begin to have to find other avenues of investing their money other than treasury bills because they aren’t earning enough.

Most importantly the banks instead of lending have relied on making money from treasury bills. I have been in banking for over 20 years and I can say the banks will now have to sit and rethink how to make money. They don’t have a choice.”

He added that: “They are taking savings from people at 10 percent and if their margin is two percent, it is too low to make profit, they have to lend to make about 20 percent so they can have a bigger margin. So I can say that from October, we shall see efforts of banks to look for customers to lend to,” he added.

The central bank’s policy rate was reduced to 21 percent at the last MPC meeting as inflation for last month reached 12.1 percent. Coupled with the low interest on T-Bills and ongoing disinflation, the bank is hopeful lending rates, averaging 32 percent, will soon trend downwards to mirror the ease in the policy stance.

Building a Ghanaian-owned economy

Mr. Osafo-Maafo, who will be a special guest at the sixth edition of the Ghana Economic Forum said the event is essential as government remains committed to building a business-friendly environment to support the creation of jobs.

“A forum of this nature is extremely important because if you want to create business-friendly environment, you must identify which problems inhibit the growth of businesses. At the forum, we expect business leaders to come up with what they perceive to be the bottlenecks.

It is important to identify these bottlenecks and offer suggestions and some of these suggestions will come from the business people, and government, together with the private sector, can move to solve the challenges.

The sixth edition of the Ghana Economic Forum is scheduled for August 7 & 8, 2017 at the Kempinski Hotel, Gold Coast City, Accra.

The event, which is to be held under the theme: “Building a Ghanaian Owned Economy, 60 years after independence,” will bring together over 500 chief executives, investors and financial decision-makers to support the development of Ghanaian businesses and facilitate dialogue between the private and public sectors.

The two-day forum will take a critical look at energy, agriculture, entrepreneurship & innovation, the financial management reforms, and other areas crucial to the development of Ghana’s economy.