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17.11.2005 Business & Finance

AGI-AMALBANK launches finance scheme for SMEs

By GNA
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Accra, Nov. 17, GNA - The Association of Ghana Industries and the Amalgamated Bank on Thursday launched an SME financing scheme as part of efforts to increase access of small and medium scale enterprises to finance and to help grow the sector.

Dubbed, the AGI-AMALBANK Finance Scheme, the initiative would be implemented on pilot basis for a year, after which it would be expanded. Under the scheme, firms could qualify for either a working capital or a term loan. The working capital facility, which is a short term loan would be for a period not exceeding one year, while the Medium Term Loan covers a period between one and three years.

Both facilities will attract a concessionary i nterest rate of Base Rate plus 2 percentage points on the reducing balance as well as reduced processing and commitment fees.

With good documentation, qualified SMEs applications could be approved in three weeks. Qualifying SMEs must be members of AGI; have an ongoing business and must be customers of the bank among other criteria. AMALBANK is initially committing a total of 40 billion cedis to the first phase of the project.

Speaking at the launch, Mr Kwamena Bartels, Minister of Private Sector Development asked the bank to reconsider the requirement of collateral, saying it had been the biggest problem facing the SMEs in the country.

The Minister was not happy that the Bank would accept Eximguaranty Company Limited guarantee for the loans as a complement to client's collateral.

He said making Eximguaranty's guarantee an addition to the clients collateral would be making access to credit for SMEs expensive and increasing their cost of products.

"I suggest that a second look is taken of this very critical condition to make it a little easier for SMEs to access this facility," Mr Bartels said.

He lauded the low interest rate of the loan and the complementary services such as training in bookkeeping and financial reporting, which would be rendered by the Bank to under the scheme to enhance the performance of the sector.

Mr Eric Osei-Bonsu, Deputy Managing Director of AMALBANK said the Bank would remain committed to its focus of extending finance to firms within the SMEs sector.

He said, when supported, the sector could make positive impact on the economy since it currently employed the vast majority in the informal sector as well as generate taxes to support government expenditure.

Mr Prince Kofi Kludjeson, President of AGI said the intervention would go a long way to improve access of SME's to bank finance. He said most traditional banks were usually unwilling to finance SME activities because of the high transaction costs involved in loan administration, lack of owners' equity and poor management expertise, among other factors.

Mr Kludjeson appealed to banks to focus more on the merit and viability of a business instead of the collateral security. In a speech read for him, Mr Emmanuel Asiedu-Mante, Deputy Governor of the Bank of Ghana asked banks to build their capacity to support the SME sector since it was relatively new area.

In this direction, he said, it was necessary to safeguard operations through proper credit appraisal, efficient monitoring and loan recovering mechanism.

Mr Asiedu-Mante therefore, urged the banks to support their customers with training in areas such as business management, strategic planning and funds management, among others. Nov. 17 05

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