Ghana’s Economic Recovery Covid-19 Now And Beyond -Revamping Of Smes.

I had the opportunity of being a participant at the 10^th Ghana Economic Forum, held this week under the theme:

Strengthening home grown policies to underpin the national digitization drive and shared financial prosperity.

I must congratulate the Business and Financial Times (B& FT) and its partners for this all-important forum and particularly for the theme chosen.

At the forefront of the discussions was the issue of strengthening our economy during this COVID-19 period. It is irrefutable that one of the surest ways to revamp the economy is to strengthen the private sector as the Government’s role is basically to create the enabling environment for businesses to thrive.

One of the government’s recent initiative in this pursuit, is the Obaatan Pa” which is a GH¢100 billion Ghana Covid-19 Alleviation and Revitalization of Enterprises Support (CARES).

The “Obaatan Pa” is a three-and-a-half-year comprehensive programme to mitigate the impact of COVID-19 pandemic and to return the country to a sustained path of robust growth and to create a more resilient and transformed economy.

The private sector has had serious challenges within this period of COVID-19 and whilst the government is doing its part, it is expected that financial institutions will also do theirs. It is however a fact that, financial institutions in Ghana are risk averse towards SMEs which form about 85% of the private sector in Ghana.

I would at this time not bother going into the reasons for the aversion, as they are quite obvious. I will however summarise by stating that, loan recovery whenever there is a default is always a hurdle.

The digitization drive is very key as it acts as a catalyst to improve “Know your customer (KYC)” for the financial institutions.

Whilst these programmes are being introduced, I would suggest that the Trade and Business Associations are not left out of the conversation; roping them in as guarantees for their membership should be highly driven on the agenda.

The Trade and Business Associations can be saddled with the responsibility to ensure their membership maintain good governance structures and are creditworthy enough for consideration for a loan facility. When this arrangement is strictly in place, these associations can play the buffer role and boost the confidence of financial institutions to lend to their membership. This will result in lower lending rates.

The recently launched Banking Code of Ethics and Business Conduct which serves as a guide within the financial industry in meeting their obligations to customers and other relevant stakeholders can be replicated in the other sectors

Furthermore, the Bank of Ghana’s Monetary Policy Committee in maintaining commercial lending rate at 13.50% at its meeting held in September 2021 is very welcoming for businesses.

Aside the necessity to revive businesses suffering the shocks of COVID-19, now is an opportune time to support and build the financial capacity and capability of our SMEs to trade and compete within the AFCTA space.

What I propose is a three-tier structure consisting of the government (Ministries of Finance and Trade) on the one hand, our trade and business associations on the other and the financial institutions on the other; working in collaboration to come up with more viable programmes to aid the private sector.

At the Economic Forum, the Deputy Managing Director of the Ghana Stock Exchange, Ms. Abena Amoah reiterated that, business entities do not have to rely solely on debt for their capital and operational needs but can also fall on equity which is cheaper and readily available via the Ghana Stock Exchange, provided a business entity meets the requirements; the first being the entity going public.

This has several advantages than disadvantages which shall be discussed later.

Another issue worth noting is the strengthening of our commercial courts and just recently the Rules of Court Committee has revised the Civil Procedure rules on commercial litigation at the Courts for more efficiency . This initiative should hopefully boost the confidence of financial institutions to lend to SMEs.

Indeed, we all look forward to better days ahead, COVID-19 here or not.

EKUA EGUAKUN,
Private Legal Practitioner