Chief Executive Officer (CEO) of the yet to be launched Development Bank Ghana (DBG), Kwamina Duker, has averred interest rates provided SMEs in the country by the Bank will remain competitive despite the inclusion of credit risk by its partner commercial banks.
According to Mr Duker, interest rate on loans made available by the DBG to its partner commercial banks in the country, will be low enough to allow the banks add their credit risk margin and still be able to lend SMEs at competitive interest rates.
“We aim to provide to our banks, loans at a rate that will allow them to take the credit risk to the SMEs and still be able to provide competitively priced loans. And that is work in progress, but we continue to work hard to make sure that the loans that we give to our banks are low enough that when they add their margin for credit risk, they will still be able to provide these loans to the SMEs that allow them [SMEs] to grow,” Mr Duker stated speaking to norvanreports at a media brief on Monday, June 13, 2022.
Presently, interest rates per the Ghana reference rate is 20.80%, making the cost of credit to businesses in the country extremely expensive.
Given the recent hike in the monetary policy rate by the Central Bank on the back of the country’s surging inflation rate, interest rates on loans are expected to inch higher, further curtailing the ability of businesses to borrow from banks.
The DBG which is expected to be launched on Tuesday, June 14, 2022, is expected to provide affordable capital (low-interest rate loans) for medium and long-term investment by businesses particularly SMEs.
The commencement of the DBG will see micro, small and medium-scale enterprises (MSMEs) being able to access cheap but long-term loans with tenors of 5 years, 7 years, or even 15 years to finance their businesses.
Per its mandate, the DBG will focus on transforming industries, agriculture, agro-processing, and housing and mortgage sub-sectors of the economy over the medium term.
When operational, DBG will deploy products and instruments such as credit guarantee funds, refinancing of Participating Financial Institutions (PFIs) loans, term loans, business development services and factoring, among others.
Source: norvanreports
