Ghanaian manufacturers find it difficult to obtain credit, even with falling lending rates. The Association of Ghana Industries (AGI) confirms that credit mostly goes to commercial trading and services, not manufacturing.
The Chief Executive Officer of the AGI, Seth Twum-Akwaboah, states that manufacturers still do not receive enough credit. This problem persists despite a reduction in bank lending rates. Most available funds support short-term commercial activities rather than long-term industrial growth.
This issue fits into Ghana’s broader economic challenge of industrializing and creating jobs. Data shows that the productive sectors, like manufacturing, need significant investment to expand. However, banks prefer to finance less risky commercial ventures. This trend has been observed even as the Bank of Ghana works to stabilize interest rates.
Mr. Twum-Akwaboah explained that lending rates have indeed decreased. He noted that rates previously reached 25% to 30% but have now fallen. However, he stressed the main concern is where these loanable funds are directed. “If you look at the numbers, it is still going more to commercial trading and then the service sector,” he said. He added that manufacturers receive a much smaller share.
The lack of suitable financing affects manufacturers needing long-term investments. Setting up a factory takes a long time, often six months to a year for construction alone. Manufacturers require longer repayment periods, lower interest rates, and sufficient grace periods before they start making payments. Current banking structures, largely focused on short-term commercial funding, do not meet these specific needs. Short grace periods and brief loan tenures make it hard for industrial businesses to succeed. Ghana’s banking system primarily supports commercial financing. This structure makes it difficult for businesses seeking capital for long-term industrial projects.
Strengthening access to development finance is crucial for Ghana’s industrial agenda. Institutions like Development Bank Ghana (DBG) and EXIM Bank exist to provide this financing. However, their effectiveness in meeting manufacturers' needs requires assessment. Mr. Twum-Akwaboah emphasized the need to interrogate these institutions. Without dedicated efforts to channel credit to productive sectors, businesses will struggle to expand. This will happen even if overall economic indicators improve. The government’s 24-hour economy vision relies on thriving industrial sectors. This credit gap threatens to undermine such initiatives.