While the Ghana Card will boost the confidence of financial institutions to lend to businesses and individuals without much fear, the painstakingly slow judicial process could derail expected gains the national identification card could bring in terms of exponential growth of credit, Managing Director of Dalex Finance, Kenneth Kwamina Thompson, has said.
In an interview with the B&FT on a range of issues in the financial sector, he lauded government for aggressively pushing use of the Ghana Card as the sole form of identification in all spheres of the economy, particularly for financial transactions.
His only major cause for concern is the country’s snail-paced judicial process, which can take as long as seven years for a judgement to be arrived at in the commercial courts.
“The Ghana Card is an absolutely brilliant idea, because it is the surest way to promote credit and payment in this country; and for an economy to grow, it needs credit. Everybody needs credit for health, school, among others.
“Government cannot create all the jobs and so the private sector is vital; but then, the private sector needs credit to grow. The Ghana Card will therefore lead us to a point where you know who you are lending to because we have combined that identity to one document across all platforms. We know the people we have lent monies to and how to collect those monies. Suddenly, we are not afraid to lend.
“But we need a new legislative instrument or law to back us in taking on the risk to lend more. At the moment, our court system is too slow. You have a case in court, and it takes up to seven years; and then when you get judgement, there is further frustration in realising your judgement.
“To make it worse, the judges are sympathetic to the borrowers – forgetting that it is their money that is being given to the borrowers. You go to court and there is a circumstance where the judge will say that when the case comes to court we should stop charging the interest on the money, whereas depositors’ interest has not been stopped,” he said.
An International Finance Corporation (IFC) report titled ‘Ghana Secured Lending & Credit Evaluation’ shows that court proceedings for the enforcement of security, on average, take two to three years to complete – with interim applications made by the borrower and third parties contributing significantly to delays in the hearing of cases.
Also, the procedure in commercial courts includes a pre-trial settlement process that contributes to the length of time taken to complete the case. The report further notes that the commercial court rules do not permit an application for summary judgement or judgement on admissions, even when the borrower does not dispute a default to be made before the pre-trial settlement is concluded.
To Mr. Thompson and many other actors in the banking and finance industry, these delays contribute to the reluctance of banks and specialised deposit-taking institutions in lending to households, individuals and businesses – since the Bank of Ghana’s rules and directives are very clear on when and how to make allocations for loans once they are given.
“Power must be given to bailiffs to do investigations, which would then allow for the fast-tracking of court cases; and that would really pave the way for what this country needs. If credit explodes, then the private sector can borrow, create jobs and export more, and the Ghana Card is at the heart of it all,” Mr. Thompson added.
Data from the Bank of Ghana (BoG), contained in its Summary of Macroeconomic and Financial Data for January show that the value of Private Sector Credit (PSC) outstanding stood at GH¢48.4billion, representing an annual growth of 11.1 percent.
When adjusted for inflation at 2018 prices, however, the real annual growth of outstanding credit to the private sector has contracted at a rate of -1.3 percent, according to the BoG.