There is no gainsaying that Small and Medium scale enterprises (SMEs) are the bedrock of Ghana’s economy, Second Deputy Governor of the Bank of Ghana (BoG) Elsie Addo Awadzi has said.
She said SMEs account for over 92 percent of all businesses many of which are owned by women and young entrepreneurs, and contribute about 70 percent of Ghana’s Gross Domestic Product (GDP).
Despite the important role played by SMEs in the country, access to finance for the SMEs remains a perennial challenge, she however said.
The finance gap impedes a critical segment of our private segment from surviving, growing, and playing a more meaningful role in our socio-economic development.
Speaking at the launch of the “Absa SME loan at 10%” in Accra, the Second Deputy Governor of the BoG, Elsie Addo Awadzi said the “ABSA SME loan at 10%” initiative is therefore revolutionary, as it is designed to address the SME finance gap in many ways including by (i) by scaling up the volume of loans to SMEs; (ii) pricing these loans at an unbelievable 10 percent; (iii) requiring no collateral for loans of up to Gh¢ 1 million; and (iv) supporting such borrowers with much-needed capacity building and business supporting services.
“Indeed, this is a ground-breaking, bold, and laudable initiative and I congratulate Absa Bank Ghana and its Board and management team for throwing this lifeline to Ghanaian SMEs. I also commend and congratulate Mastercard Foundation for making this initiative possible through financial support.
“Indeed, given the current lending rates on the market starting from the base rate or Ghana Reference Rate of 26.45 percent as of May 2023 even without adding the risk premia and fees that banks typically add on to arrive at their Annual Percentage Rates for borrowers, offering SMEs loans at 10 percent comes at a deep subsidy which I understand is made possible thanks to the benevolence of Mastercard Foundation.
“While thanking Mastercard Foundation for this feat, let me challenge them to do even more by deepening their partnership with Absa Bank to ensure that even more SMEs benefit from this initiative beyond the 5,000 expected at this juncture.
“I also expect that even lower interest rates will be offered to SMEs with time especially as inflation continues on a downward path as we have seen consistently over the last four months including with the just-released inflation reading for April 2023 at 41.2 percent down from 45 percent in March 2023. We expect to see interest rates on the market trend downwards, and therefore it is conceivable that with the help of Mastercard Foundation this initiative could offer loans below 10 percent in the not-so-distant future.”
Se further encouraged “SMEs to take advantage of this opportunity provided by this partnership between Absa Bank Ghana Limited and the MasterCard Foundation and to make the most of this to scale up and build more sustainable and resilient businesses. With this lifeline, SMEs should aim to venture more into manufacturing to produce enough to help make our economy more self-sustaining and able to withstand external shocks that we contend with every now and again. Furthermore, SMEs should aim to produce for the African market and take advantage of the African Continental Free Trade Agreement to serve the whole continent, aided by the Pan–African Payments and Settlement platform that ensures safe, efficient, and timely cross-border trade settlement.
On its part, she added, the Bank of Ghana remains committed to achieving its statutory objectives of ensuring price stability, promoting economic growth and the effective and efficient operation of the banking and credit systems in the country, and promoting financial stability.
“Indeed, our banking sector remains solvent and liquid even after the pandemic, in the face of recent macroeconomic challenges, and in particular the Government debt restructuring efforts. It is worth mentioning that the banking sector clean-up and recapitalisation efforts before the onset of the pandemic, provided the industry with the necessary capital and liquidity buffers to withstand the pandemic and the recent macroeconomic challenges. We expect banks over the next few years to take steps to rebuild strong buffers so that they remain resilient for the long-term.”