AGI: 120% collateral demands shut businesses out of bank credit
AGI says collateral worth 120% of loans blocks firms from credit despite falling rates.
The Association of Ghana Industries (AGI) has revealed that businesses are being denied bank credit due to collateral demands equivalent to 120% of the loan amount. Eric Defor, chair of the AGI's Economic Affairs Committee, made this statement on JoyNews' PM Express. Lenders are demanding collateral worth nearly 120% of the requested loan, according to Defor.
He noted that while banks are currently liquid due to the government's continuous repayment of debts under the Domestic Debt Exchange Programme, these funds are not reaching businesses on reasonable terms. The average lending rate has dropped significantly from 24.15% to 15.94%, and nominal private-sector credit grew by 35.5% to GH¢123.3 billion over the same period.
Defor acknowledged the risks highlighted by Ghana's financial crisis but questioned the allocation of the available funds, suggesting some banks might be investing in government securities instead of lending to companies. He called for accurate data on credit distribution and praised the VAT reforms for reducing production costs, while crediting the Bank of Ghana for maintaining steady key indicators.
The AGI chief urged the government to prioritize businesses' financing constraints when finalizing the 2027 Budget, which is set to be presented to Parliament today.
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- 120% collateral requirement shuts businesses out of credit — AGI myjoyonline.com
