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03.04.2008 Business & Finance

Banks Urged To Reduce Interest Rates

COCOBOD Chief  Mr Isaac Osei, has questioned the rationale behind the high bank interest rates in the country in spite of the gains in the macro economic stability.

In his view the interest rates and other commissions charged by financial institutions, which were the highest in the West African sub region, were only meant to generate more profits for the banks and not to enhance the socio-economic development of the country.

Describing the situation as totally unacceptable, Mr Osei pointed out that, the activities of the financial institutions in this era of competition, rather “increases operating costs of business, limits investments, retards the growth of the real sector of the economy and discourages the individuals from doing serious business with the financial institutions in the country”.

“The spread between the Bank of Ghana's prime rate and the interest rates charged by banks is symptomatic of either inefficiency or collusion or both”, he charged, adding that “the charges imposed on the business community and individuals who do business with the financial institutions have no basis, so the banks have to be more efficient and guarantee increasing profits because their interest rates spread are completely unacceptable ”.

Mr Osei was speaking at the launch of the 2007 Corporate Initiative Launch of the National Bank Survey award in Kumasi.

Corporate Initiative Ghana, is made up of a group of national and multi-national companies, with the common aim of providing efficient financial services industry in the country.

Among the members are AngloGold Ashanti, Coca-Cola, GHACEM, Guinness Breweries, Interplast, Mechanical Lloyd, Nestle and Unilever.

The 2007 Ghana Banking Awards under the theme “ Promoting Easy Banking for all; Individuals and Businesses”, sought to measure the performance of 23 universal banks in Ghana on16 key indicators. The awards which started in 2001, is a process that recognises the achievements of banks on selected performances.

The indicators to be used to measure their peformances for the awards are customer care, advisory services, trade finance, short, medium and long term loan financing, IT and electronic banking as well as product innovation and corporate social responsibility.

Other indicators are a growing bank, financial performance, competitive pricing, export finance, corporate banking, retail banking and bank of the year.

In line with previous awards, over 5,000 respondents are expected to be interviewed throughout the country, using the 'opinion meter' survey as well as face to face interviews for retail and corporate users of banking services respectively.

Mr Osei noted with concern the inability of financial institutions to come out with attractive products that would entice cocoa farmers to cultivate the culture of savings with the banks.

“A group of Ghanaians who should be a major target for the banking sector are cocoa farmers. With increase in cocoa production and a lot of the youth going into cocoa farming, banks and other stakeholders need to re-visit the Akuafo cheque system”, he advised, adding that“ the success of the Akuafo cheque is contingent on access to banks in cocoa growing area.

“This will help inculcate the banking culture in the over 720,000 cocoa farm-families in Ghana”, he advised.

Mr Osei also noted that with the recent discovery of oil in commecial quantities in the country, financial institutions needed to expand and increase their capital base “to contain the major boom and the associated huge investments needed to support the petro-chemical industries and other supporting services the economy will take on board”.

He pointed out that the sector's ability to respond effectively to the oil find “depends on the adoption of technology as key driver of the change we envisage”.

He pointed out that electronic banking was convenient because it did not only afford the opportunity for easy and effcient business ventures but also allowed customers to initiate and conclude payments from the comfort of their homes or offices.
 
It also allowed users to focus on other areas of their businesses and allowed the system to manage their individual and organisational collection processes and payment requirements”.
 

Story by George Ernest Asare

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