More needed for businesses to feel impact of credit bureau

A platform (app) designed to transform credit referencing in the country has been unveiled.

Christened; “myCreditScore,” it has been piloted for over two years and it is, therefore, expected to redefine credit referencing in the country.

Having met the licensing requirements under the Credit Reporting Act, 2007 (Act 726), myCreditScore has been licensed by the Bank of Ghana (BoG) to operate as the third service credit bureau in the country.

The Graphic Business associates itself with the description given to the app as the gateway to financial opportunities.

Coming at a time when Non-Performing Loans (NPLS) in the country continue to rise, we believe such an initiative will go a long way to help reduce the phenomenon which is threatening the continued survival of the financial services sector, particularly banks.

The paper also trusts that the credit bureau will in the medium to long-term, help to reduce the high interest rate regime in the country and pave the way for businesses and households to borrow at much cheaper interest rates.

To give some more perspective on the NPL situation in the country, the 120th Monetary Policy Report (MPC) of the Bank of Ghana noted that the banking sector’s performance continued to improve, with assets growing at 38.7 percent at the end of August 2024, compared to 19.6 per cent in August 2023. Both pre-tax and after-tax profits were higher in the first eight months of 2024 relative to the same period last year. 

Among others, liquidity and efficiency ratios also improved during the first eight months of the year, highlighting that broadly, key financial soundness indicators are improving in the banking sector. 

What the Graphic Business, has, however, noted is a disturbing development, that is, despite these improvements, the NPL ratio had risen sharply to 24.3 per cent in August 2024, up from 20.0 per cent in August 2023, reflecting increased defaults from large borrowers and highlighting that elevated credit risk remains the primary concern for the sector’s outlook.

Another worrying point was the fact that the weighted average lending rate on the interbank market increased. 

The rate increased to 28.84 per cent in August 2024 from 26.59 per cent in August 2023, albeit the average lending rates of banks to households and firms over the period declined marginally to 30.79 per cent in August 2024 from 31.78 per cent in August 2023.

At the stage of our development, the Graphic Business undoubtedly believes that the figures stated above are not the best for an economy such as ours which holds a lot of potential for real growth.

We do not doubt that the economy can be better if the right initiatives and environment are created by the government to enable businesses to thrive.

Borrowing at the rates indicated above, we believe, will definitely result in the double-digit NPLs.

The Vice-President, Dr Mahamudu Bawumia, who launched the platform, said the credit score was like a financial report card which quantified loan payment history, debt levels and credit behaviour into a single number, making it easier for banks and other lenders to access one’s financial reliability.

To us, while the initiative is good, there is the need for the government to also play a major role in ensuring that the very policies such as the cumbersome tax regime, high cost of utilities among many other factors that contribute to the high cost of doing business in the country, are urgently addressed.