Banks are ready to channel funds into strategic areas that would accelerate economic growth and ensure a quicker recovery from the scourge of COVID-19 but government must create a more stimulus to attract such funding from commercial banks, the Deputy CEO of the Ghana Association of Bankers, John Awuah has said.
Speaking as part of the first plenary of the 2020 Ghana Economic Forum (GEF) which focused on ‘Building resilient financial institutions to mitigate the impact of COVID-19’, Mr. Awuah stressed that commercial banks in the country have an important role to play to help mitigate the impact of COVID-19 on the economy but there is a huge risk attached which cannot only be borne by the banks but also the government.
For him, if the government drafts policies which would guarantee low taxes from banks that venture into financing areas like manufacturing, agriculture and others, it could be a good hook to pull banks along to support economic recovery.
“That is why I am talking about the reduction of tax rate. If there is a policy saying that if you lend to manufacturing companies, your taxes would be somewhere between 10 -12 percent, it will attract banks. That way, people will look at their portfolio and say, how can we repackage our portfolio to take advantage of this? That is what I mean when I said we need a stimulant,” Mr. Awuah told the B&FT in an interview after the event.
He noted that government is doing quite a bit in that area with the credit guarantee fund of GH¢2 billion and Ghana Incentive Based Risk Sharing Agricultural Lending (GIRSAL) for agriculture products.
“We need pockets of these but we need it in a coordinated manner not in standalone fashion. I am happy that the GH¢2 billion credit guarantee has been put under GIRSAL so that GIRSAL is not only just agric but they are handling guarantees for other sectors like the SMEs and manufacturing.”
The ninth edition of the GEF is focusing on ‘Resetting the economy beyond COVID-19: Building economic resilience and self-sufficiency’. Mr. Awuah told the paper that COVID-19 has shown how robust the economy is and it can cater for itself when it is called into action. Therefore, pragmatic measures must be developed and supported to boost economic growth, he added.
“COVID-19 has taught us one lesson: that the country has the capacity to manufacture what we consume. What is always missing is whether we have the demand and now it has been shown that if the product is there, the demand is there. We have the examples of hand sanitizers and face masks to learn from.
The banks gave some of these companies the funding to move away from some of the things that they were doing traditionally into the production of face masks and others. But what I am saying is that, if we want to make it a national agenda and for it stimulate the kind of traction we are looking for then we need a push to direct the finances of banks into the area where you want credit creation to be enhanced.”
