Former Managing Director of ADB Bank Daniel Asiedu has jumped to the defense of commercial banks charging high interest rates.
Commercial banks in the country have refused to reduce their lending rate to correspond with the Bank of Ghana’s base rate which is currently at 18 percent.
Most of the banks charge over 30 percent on money borrowed, a figure that has been described as one of the highest in the West African sub region. Also, the introduction of the reference rate is yet to have any significant impact on the current rates.
Several calls by the business community, especially the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce for a reduction in the rates to enable businesses access credit to finance and expand their operations have not yielded much results.
Therefore, in what seems like a passionate appeal, Minister of Business Development, Dr. Muhammed Awal, speaking at a signing ceremony for a partnership between Ghanaian Company, Lych Capital and the Colido Group from Netherlands, asked the banks to reduce their rates for businesses.
He lamented that the high interest rate is a major set back for government’s vision to create more jobs.
But responding to his comment, Mr. Daniel Asiedu said the banks only serve an intermediary role and therefore cannot reduce the rates unless the cost of funds accessed by financial institutions are reduced.
He explained that “the funds are not for the banks and so if the rates are low from where they are taking the funds, then they can reduce their lending when giving the funds out. People give money to the banks and they want high interest on them. The treasury rate is also a determinant and so if it is high and the banks add their margin then the rate goes up. ”
Mr. Asiedu admitted that all though rates see a marginal drop once in a while, the borrowing public is not satisfied.
“The thinking is that the banks can push and bring it down, but no bank wants to operate at a loss,” he added.
According to him, everybody including the Bank of Ghana and government must work together to ensure that the rates further reduces.