By Kofi Thompson
Today, dear reader, I am sharing an article posted on the online version of the UK newspaper, The Telegraph - at 7:26PM BST, on 27 August, 2012 - by John Longworth, who is Director General of the British Chambers of Commerce.
Entitled "Creating a business bank is the bold move needed for growth" the culled article makes for interesting reading - and ought to be food for thought for Ghana's political and business elites.
If we are to create a prosperous society in Ghana, a business-friendly climate ought to be created and sustained over the long-term.
Many of the points John Longworth makes in his article, apply to our country Ghana too. And as we say in Ghanaian pidgin English, "Massa, nowhere cool!" Please read on:
"Creating a business bank is the bold move needed for growth
By John Longworth, Director General of the British Chambers of Commerce
As the denizens of Whitehall and Westminster continue to puzzle over Britain's rocky growth trajectory, they would do well to listen to the rising chorus coming from businesses across the land.
That message is clear: businesses are optimistic, growing exports and creating jobs, but need bolder action from the heart of government to sustain that growth over time. Put simply, companies want nothing less than a new-model economy for Britain, with a business-friendly environment and strong financing options for growth and expansion.
So if our political class truly wants to be bold on growth, it should announce this autumn that it is creating a British Business Bank. Together with a major programme of infrastructure investment, a business bank would be the cornerstone of an economy that is more sustainable, more dynamic, and more competitive than the Britain of today.
The case for a business bank grows clearer with each passing day. Although many companies say their order books are full and they need financing in order to fulfil customers' requests, the overall stock of lending to small- and medium-sized firms continues to shrink. Companies that are less than five-years-old, often at the point of a major growth spurt, are more likely to have loan applications declined. Independent inquiries show there is real 'discouraged demand' among businesses who are keen to expand, but too scared to even approach the bank for help. Relationships and trust between lenders and businesses, damaged at the start of the financial crisis, will take years if not decades to repair.
The situation bears all the classic hallmarks of a market failure. If there's one thing that politicians and economists of both the Left and the Right agree on, it's that governments can and should intervene where market failures exist. And that's precisely where we stand in Britain when it comes to business finance: an abject, long-standing, and worsening market failure.
This is not entirely the fault of high-street banks - they are being squeezed by ever-tighter regulatory structures and higher capital requirements, so they're taking fewer risks and sticking to the clients they know. If I were sat on the board of a major UK bank, I'd probably act in precisely the same way, as I'd be protecting the interests of shareholders and the bank itself.
The trouble is, in a world where politicians and banks look after themselves, there's no one championing the interests of the new, dynamic and fast-growing companies that will create the jobs, technologies, and wealth of the future. That's where a business bank comes in.
A British Business Bank would act as a first port of call for businesses seeking finance. Working closely with high-street banks, alternative lenders, sources of equity finance and others, it would ensure that most businesses actually get the working capital they need. It would only lend directly to young and/or high-growth companies unable to obtain finance through the commercial banking system.
Some might argue that the government already has a number of plans, including the Funding for Lending scheme, to boost business access to finance. Yet this scheme, like those that preceded it, has a fatal flaw: its dependence on the infrastructure of existing banks. An increasingly risk-averse and balance sheet focussed, commercial banking culture is unlikely to provide the seed-corn funding for tomorrow's growth businesses, even if it will lend cash to long-standing business customers. By contrast, a business bank would be able to start afresh, with a can-do attitude, a stronger appetite for risk, and the patient debt capital that many companies need to become the next global champion.
Despite the best intentions of politicians to do the right thing in the interest of the country, they are going to be frustrated by vested interests, reflected in Whitehall. Already, I can hear the chorus of Treasury civil servants claiming that a business bank would be too difficult to set up, too risky to operate, and anti-competitive. They are wrong on all counts. It's time for businesspeople and our politicians to stand up to the prophets of deadweight, displacement and dissuasion, and set the record straight. Setting up a new bank will take time and dedication, but it can and has been done before in many countries across the globe. Commercial lenders would get 'first refusal' of business loan requests, meaning that the business bank steps in only to support dynamic growth companies that otherwise wouldn't get funding at all. What's more, a business bank would offer loans priced appropriately to risk, not simply give away cheap money to fuel another unsustainable credit bubble.
When you look across the globe, you find many successful countries where a business bank and a strong commitment to free enterprise and capitalism go hand-in-hand. If a business bank is good enough for the USA, South Korea, and our neighbours in Germany, why not here in the UK? One can only surmise that a lack of will and imagination, rather than a lack of capability, is holding Britain back from creating a business bank of its own.
One of the difficulties UK politicians face is that they are so hung up on the short-term, they fail to consider their legacy to the country. But voters are not stupid. The British electorate rewards actions they can see are in the long-term interests of the nation, which ultimately are their interests. A British Business Bank wouldn't be up and running tomorrow - but its impact on building confidence now and on our success as a nation over the coming decades, would be incalculable and that's a legacy worth fighting for. "
End of John Longworth's Telegraph article. He is Director General of the British Chambers of Commerce.
The question posed by John Longworth: "If a business bank is good enough for the USA, South Korea, and our neighbours in Germany, why not here in the UK?" indeed could equally be posed to our ruling elites: Why can't Ghana's business community have a specialised bank to serve their needs? Food for thought for our ruling elites?
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