Businesses operating in the country are upbeat that the banking sector is now in a position to lend more to them, following the recapitalisation exercise.
The recapitalisation exercise, which saw an increase in universal banks’ minimum capital from GH¢120million to GH¢400million, ended last December and businesses are confident that the banking sector is now well-positioned to increase lending to them.
“If what the Bank of Ghana is telling us is right, what it means is that there will be more liquidity in the system because the remaining banks have all raised the minimum capital; and if this minimum capital is not locked up, then it means that there will be more liquidity or cash for businesses,” CEO of the Association of Ghana Industries (AGI), Seth Twum Akwaboah, told the B&FT.
It is only natural for banks to lend more to the private sector when they have so much capital, he said, adding that he therefore expects the credit crunch situation faced last year to ease.
The banking sector, he noted, impacts a lot on businesses in general: “Last year, the challenges we had there also affected businesses. Access to finance became a bit more challenging, and even more so at the micro and small-scale level. There have been a lot of turbulence there, some of which is not even being discussed”.
Following completion of the recapitalisation exercise, the number of banks has reduced to 23 from 36.
The reduction in number sits well with the views of many financial experts, who had been advocating fewer but stronger banks that can dole out much-needed funds to businesses, particularly the SME sector.
Financial sector still lacks confidence
Although Mr. Twum said businesses are hopeful that the banking sector has been repositioned to increase support, he added that more needs to be done.
He explained that other areas of the financial sector – such as savings and loans, microfinance, among others – are suffering from a dip in confidence levels, and that it is equally imperative for these sectors to be strengthened in order to allow the financial sector to play its role of funding private sector growth.
“There has been a lot of turbulence. So, if we say that the consolidation has been completed, we are referring to a specific area – universal banks; but when it comes to the financial sector in general, I don’t think it is complete because there is a lot of work still to be done, especially in bringing back confidence to the system.”
Today, he said, most people are not investing in microfinance companies and savings and loans because they lack confidence. The result, he noted, is a tightening of the liquidity needed for onward lending to small- and medium-scale enterprises.
“We cannot fail to instil confidence in the banking sector and the financial sector in general, otherwise people will not bring their monies to the banks, the savings and loans and the microfinances; they will hide the money under their beds, and this does not promote development.
“So, on the part of businesses, we want to see an improvement in that area: people having confidence in the entire financial sector, not just the banks alone,” he further stated.