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AGI advocates flexibility with GH¢2 billion guarantee

Seth Twum Akwaboah CEO Association Of Ghana Industries AGI Seth Twum Akwaboah, AGI CEO

Wed, 29 Jul 2020 Source: thebftonline.com

The GH¢2billion guarantee programme to support all sectors of business must be made flexible enough, and should be able to provide up to 100 percent cover for businesses if it is to achieve the intended impacts, the Association of Ghana Industries (AGI) has advised.

Finance Minister Ken Ofori-Atta, during the mid-year budget presentation to lawmakers in Accra, announced that government will establish a GH¢2billion Guarantee Facility to support all sectors of business and job retentions as part of efforts to help businesses hit by the Coronavirus pandemic access credit to sustain their operations.

The AGI, which described the move as positive, is however demanding more clarity. Its Chief Executive Officer, Seth Twum Akwaboah, said it would be fit and proper to ensure the programme is made flexible and that government must ensure it is rolled out immediately so as to provide much-needed relief to medium- and large-scale businesses hit by the crisis.

“I think this is positive,” he said. “It is bigger than what has been earmarked for the smaller enterprises. It may not be enough, but at least it is still a good effort. The only thing is that we need to interrogate it further; because when you say a guarantee, it is not cash that you are giving. It is to support banks or financial institutions that will advance credit facilities, and then in case of default they fall on the guarantee,” he told theB&FT.

Of more importance to success of the initiative, to him, would be how quickly it can be rolled out and the modalities put around it. He is of the view that it will not benefit businesses if, for instance, it is subjected to cumbersome or normal banking appraisal processes which usually take a longer time. Doing so, he warned, will defeat the intended purpose of providing relief to businesses during this time of emergency.

“As long as the banks have some security risks in it, any cover of less 100 percent will be an obstacle; because if they (banks) are not 100 percent sure, they will not give out the loan. And then if it is also going to be subjected to the normal banking process, it could take long before it is appraised; meanwhile, this is an emergency situation.

“It is a response that government is giving to the crisis we have, and therefore the timing of it is critical. So, we need to look at all these details before we will be able to conclude whether indeed this GH¢2billion that has been earmarked is going to be beneficial,” Mr. Akwaboah added.

Explaining further, he said: “Typically, when banks are appraising projects they are not only looking at the collateral you have, they are not just looking at the guarantee you have: they are also looking at the enterprise’s ability to pay back, which is proper.

“How flexible they will be, we have no idea; so, these are the issues that need to be interrogated. We also need to find out if it is going to give 100 or 50 percent cover.”

Source: thebftonline.com
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