Ghana's financial sector explores impact of credit ratings

The impact of credit ratings on the debt capital market in Ghana was the center of discussions at a seminar organised by Agusto and Company Limited in Accra on Friday, August 23, 2024.

The discussions focused on the importance of expanding and improving the ways financial institutions and businesses can get funding. This aims to increase the availability of money in the economy, which helps businesses grow and develop in a sustainable manner.

Dr. Kwesi Yankey on his part stressed the importance of using credit ratings to provide access to long-term, affordable loans.

"Credit ratings have been known to provide much-needed transparency and access to long-term and affordable financing, all of which are critical to sustainable economic growth and development. Specifically, credit ratings provide an essential measure of relative credit risk, facilitating the efficient issuance and purchase of bonds and other debt instruments. It is, therefore, in our interest to advocate for and develop a transparent and contextually relevant credit ratings culture," he stated.

Mr. Kumapayi discussed the funding challenges for African institutions, such as limited access to capital markets, high costs, and unstable exchange rates.

The Executive Director of Access Bank Plc, in his presentation, stated, "Improvement in Africa’s access to funding (particularly from foreign markets) will require improvement of sovereign ratings from credit rating agencies and a change in risk perception from potential investors on investing in African countries and banks.

"This will, in turn, require countries and governments to develop the liquidity of domestic financial markets, improve the transparency of the budget process, and strengthen the quality of public institutions. Banks operating in Africa should also work towards adopting international best practices on governance, regulatory, and compliance matters to increase confidence from international and domestic investors."

The Group Managing Director of Agusto & Co., Yinka Adelekan built on earlier discussions by explaining credit ratings and the outfit's approach to assessing credit risk.

She also emphasised on the development of the domestic debt market with credit ratings and presented risk assessments for nine major Ghanaian banks.

The Head of the Ghana Fixed Income Market, Augustine Simons on his part highlighted how the banking sector clean-up, COVID-19 pandemic, and Domestic Debt Exchange Program impacted Ghana’s investment climate.

He suggested the use of innovative technology, domestic credit rating agencies, and a strong capital market to help solve Ghana’s debt market issues.

The seminar featured keynote speakers like Mr. Augustine Simons, Head of the Ghana Fixed Income Market; Mr. Seyi Kumapayi, Executive Director of African Subsidiaries, Access Bank Plc; and Mrs. Yinka Adelekan, Group Managing Director of Agusto & Co.

MA