Date: 2017-09-15

Chief Executive officer of the Association of Ghana Industries (AGI) Seth Twum Akwaboah has registered his apprehension to the “general” increase in the minimum capital requirement of Commercial Banks by the Bank of Ghana from GHS120million to GHS400million by close of 2018.

Making a case for a drop in the bar for banks that are focused on making particular interventions in the SME sector, Twum Akwaboah observed that even though the universal banking concept is good, it was time to look towards specialized banks that can provide financial intermediation on specific business projects.

“I don’t believe in this general capital requirement that everybody must meet regardless of how specialized you are.  I don’t think that is the solution.”

He was speaking at an African Partner Pool (APP) Business Forum organized by Invest in Africa (IIA) in Accra on the theme “Finance: A critical need to grow your business, but how and where can you access it?”

Access to finance has remained a major challenged to most SMEs for several years and has featured in the top five of the AGI Business Barometer Survey in almost every quarter over the last four years.

The CEO, though in acknowledgement that the increase in the capital requirement would make more loanable funds available to businesses, also argued that the situation is not guaranteed under the current arrangement. 

“ I can assure you, 2018 will come, banks will find a way to meet these requirements, but it may not necessarily resolve this critical issue of access to finance for small and medium scale enterprises (SME). 

Twum Akwaboah proposed the long-held position of the private sector that government stops competing with businesses for funds on the domestic market so that the rate of borrowing reduced, thereby, improves SME access to financing.

He entreated government to work at ensuring stable and predictable macroeconomic environment to reassure the financial sector that improvements in macroeconomic indices are real, which will engender confidence and bring down interests rates. 

On concerns relating to bank officials frustrating an otherwise brilliant credit application, the CEO advised banks to hire persons with significant project management experience capable of undertaking project appraisal and evaluation to determine the right quantum of credit needed. 

He advised SMEs to explore other funding sources including suppliers’ credit arrangement, listing on the Alternative Stock Market or consider equity financing in order to meet their funding needs. 

He suggested possible synergies and merges by SMEs to create strong entities with the requisite competitive edge to source for funding for growth and expansion.

Source: Goldstreet Business News