Stanbic, others must keep up good work

Industrialisation is not for the faint-hearted, neither is it pursued as a knee-jerk reaction to nagging problems.

As the industrialist and economist, Dr Tony Oteng-Gyasi, put it at the Graphic Business/Stanbic Bank Breakfast Meeting yesterday, Ghana failed in its attempt to industrialise due to the lack or unavailability of a clear national strategy behind which every citizen would work.

The Daily Graphic could not agree with him more because such a strategy, which will become the rallying point for economic actors, usually contains the ingredients required to make the programme succeed. These include cheaper financing that will enable industries to grow, expand and employ more people.

Access to credit and the high cost of credit and raw materials (inflation) have featured prominently in the AGI Business Barometer Index for many years. This points to the fact that the country has, for a long time, had a sticky interest rate regime, with the banks charging high for credit creation, making it challenging for industry to access or repay loans.

Over the years, industrialists such as Dr Oteng-Gyasi have called for a departure from the moral suasion approach to tackling the high interest rates to exercising some form of intervention in the market to drive down rates.

It is heartwarming, therefore, that after a long search, including efforts to change the formula for determining effective interest rates in the banking sector, the banks themselves seem to have found a way to drive down rates. The banks have even pledged about GH¢4.5 billion to support the government’s One-district, One-factory initiative.

At the 10th Edition of the Graphic Business/Stanbic Bank Breakfast Meeting yesterday, the Head of Client Coverage at Stanbic Bank Ghana, Ms Sylvia Inkoom, announced that financial institutions in the country had positioned themselves to help manufacturing concerns overcome their challenges, return to profitability, expand and create more jobs.

Subsequently, she said, the institutions had begun reducing their base rates and were also offering free advisory services to players in the manufacturing industry.

The Daily Graphic thinks this is the right way to go. We share in the happiness of businesses whose call to banks to do more than just extending credit and waiting for payback is gaining traction. We believe this is what the drafters had in mind when they created universal banks by regulation.

Universal banks do not just lend money; they follow the money. If a business does not do well, the bank cannot recoup its principal fund, let alone reap from the interest thereof. This is even truer in a largely informal economy such as Ghana’s.

Also noteworthy is the fact that banks are fast responding to reductions in the central bank’s policy rate, which the banking sector regulator uses to signal the direction of lending in order to contain inflationary pressures.

In the past, even though the policy rate went down drastically, the same was not seen of the base rates of universal banks, as they shifted their explanation for higher rates towards other variables in the macroeconomic environment.

The Daily Graphic believes that higher interest rates by themselves asphyxiate businesses with more debts that eventually impede their ability to make good their liabilities and obligations to the lender.

We, therefore, urge the Bank of Ghana to continue its reforms of the sector, which we believe also have a significant bearing on the level of interest charges banks impose on borrowers. A cleaner banking sector will amount to cleaner and quality lending activities.

The banks should also walk the talk by loosening the rates indeed and not turn round to include hidden charges in the basket of charges.

We commend Stanbic Bank and other banks for their initiative to go beyond lending to provide free advisory services.