Vice–President, Dr. Mahamudu Bawumia is confident that complaints of high interest rates from commercial banks will be resolved after the economy is fully digitised since the move will reduce the risks attached to lending to businesses.
He believes there will be abundant data available for scrutiny by commercial banks and this will not only make lending flexible but also cut down lending rates.
The Digital Address System, Tax Identification Number (TIN), National Identification Card, Mobile Money Interoperability are among some of the measures government has implemented to aid the formalization of the economy.
Addressing the First Government Town Hall Meeting and Results Fair at the Great Hall of the Kwame Nkrumah University of Science and Technology (KNUSTS) in Kumasi, Ashanti Region, Dr. Bawumia recounted his days as the Deputy Governor of the Bank of Ghana saying developing measures to cut down lending rates was a major head ache.
“Digitisation of the economy will improve the economy and reduce corruption. When I was at the Bank of Ghana as deputy governor … I kept dealing with this issue and we kept talking how do we bring interest rate down …the surest way to bring down interest rate is to formalise the economy.
This is because when you go to the bank, they will know your identity; they will know who you are; this is who you are … so the risk will be minimised in lending to you. When we digitise the economy, you will see interest rates beginning to come down,” Dr. Bawumia said.
He added that, the wave of digitisation will definitely lead to more economic gains. “It will allow the working of credit reference bureaus and help bring down interest rates in Ghana.”
Interest rate in Ghana is said to be one of the highest globally. According to the Bank of Ghana, the rage of interest rate could be as low as 14 percent and as high as 42 percent for bank customers. The regulator has embarked on many initiatives to push the interest rate down but its yet to materialize fully.
President Nana Addo Dankwa Akufo-Addo has also on different occasions tasked the Bank of Ghana (BoG) to put in measures to address the phenomenon.
The Monetary Policy Committee (MPC) of the BoG has maintained its key policy rate at 16percent since the beginning of last year as one of the measures to check the menace but its yet to be effective. Some economists are worried that if nothing is done soon, indigenous firms will be struggling to be competitive and their woes will worsen with the coming into effect of the Africa Continental Free Trade Area.
Over the years, various businesses have complained and called on government to reduce interest rates on loans as they unable to pay back the loans due to the high interest rate.