Banks snub small enterprises

Contrary to the view that the private sector - and more especially Small and Medium Enterprises (SMEs) - propels the economic growth of developing countries, most of these SMEs in the country are being denied access to loans by a considerable number of commercial banks for lack of adequate bookkeeping.

“How can we develop this country collectively - when those who are supposed to facilitate the take-off of the economy apply complex and prohibitive lending procedures to refuse loans to these SMEs on the grounds that they lack basic bookkeeping to enable them qualify for loans?” Nana Dwomo Sarpong, an Accra business executive, queried.

Nana Sarpong, who is also an ardent advocate on environmental issues, drew a parallel to this delicate issue with developed economies, explaining that in advanced countries like the US and others, SMEs can easily access the services of chartered accountants to prepare their bookkeeping to enable them become credible to the banks.

He said in Ghana those SMEs which could not convince their banks for loans are requested to provide collateral, especially immovable assets worth millions of cedis. He asked: “How can these people provide this collateral to enable them access loans?” The result is that these SMEs, which are the solution to the intractable unemployment problem facing the country, will continue to remain in the state they find themselves.

Nana Sarpong disclosed that some banks in the country promote their banks with perceived low base rates - e.g. 22%. Unknowingly, people see it as a good rate for loan; but the fact is that these banks hide a facility fee of 0.5%-1% and borrowing fee of 4% among others, which raises the base rate to about 27-28% and the borrower has to contend it with during the period of repayment. He urged the banks to factor all these fees into their base rates for the public to decide which bank offers the best rates.

Nana Sarpong also accused some banks in the country of making huge profit out of indirect borrowing from their clients’ deposits at their expense. He said what the country needs now is continuous improvement by the SMEs for the economy to grow.


Source: By Kwame Mensah/B&FT/Ghana