High interest rates are killing SMEs – CEO of Ghana Chamber of Commerce and Industry

The CEO of the Ghana Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, has stressed the importance of financing the private sector to stimulate economic growth, especially in an environment where borrowing from the government has dominated the financial space.

Speaking on Joy News’ PM Express Business Edition, he stated that banks must conduct a proper risk analysis to ensure their money reaches viable private sector ventures.

“If you want to do proper banking, give money to the private sector. You need to assess their profile, their credit readiness, and their project viability. You follow up, monitor, and get your money back,” Mr Badu-Aboagye stated.

He explained that the current dominance of government borrowing reduces the incentive for banks to lend to the private sector.

“If government decides it’s not borrowing as much, the money sitting with the banks will compel them to give it to the private sector,” he said.

However, Badu-Aboagye acknowledged the challenges banks face in lending to businesses, particularly small and medium-sized enterprises (SMEs).

He cited the high interest rates, which make borrowing difficult for SMEs, whose profit margins are already slim.

“SMEs want money. Our economy depends on SMEs. Try getting money as an SME, and they give you 30% interest. How do you expect an SME to borrow at 30-40%, make a profit, and also pay you back?” he questioned.

He noted that businesses in Ghana are generally productive and profitable, but external factors such as high interest rates and a difficult business environment are driving them into losses.

“At the micro level, businesses are productive. It’s when you bring in interest rates and taxes that they start running at a loss,” he concluded.

Source:www.myjoyonline.com