Financial Analyst and Banking Consultant, Dr. Richmond Atuahene is vehemently kicking against a credit-based economy or a credit scoring system as widely proposed by Vice President, Dr. Mahamudu Bawumia.
Credit-based economies as practiced elsewhere are ones where individuals, businesses, and governments rely on borrowed money as a key means to conduct economic transactions. In this type of system, credit becomes essential for driving consumption, fueling investments, and promoting overall economic growth.
It is these types of economies that Dr. Bawumia as a part of his “bold solutions” says he will introduce in the local economy.
“On a credit scoring system: facilitating the implementation of a fully functional credit bureau system that provides comprehensive, individualized credit scores for borrowers based on a comprehensive dataset that will help credit delivery firms properly differentiate and price risks,” portions of the NPP manifesto read.
But the renowned financial analyst believes this policy is misplaced considering the current state of the macroeconomy of Ghana.
In a position paper sent to The High Street Journal, the banking consultant argued that Ghana’s economy which is currently suffering high inflation, rising interest rates, currency depreciation, ballooning debts, and budget deficits among others is not a conducive environment for a credit-based economy.
This precarious macroeconomic environment, Dr. Atuahene further states has raised the cost of credit, making loans unaffordable for many. He adds that businesses and individuals often struggle to access loans due to a combination of high collateral requirements and a weak credit reporting system.
Moreover, a credit-based economy requires credit infrastructures that are built over time. Such infrastructures include credit bureaux, scoring models, regulations, etc. He maintains that Ghana has neither a stable macroeconomic environment nor the infrastructure for banks to implement credit-based financial products.
“In Ghana, credit performance has historically been poor due to several factors, including the high level of poverty, limited financial literacy, and challenges in the regulatory and legal frameworks Ghana’s credit environment had faced general economic deterioration of macro-economic instabilities of high inflation, persistent depreciation of local currency, higher policy rates and lending rates as well high fiscal deficits,” the financial analyst argued.
He therefore declared that “Ghana’s banking sector does not need a credit scoring system right now. What it needs is a stable macroeconomic environment, policies that promote business growth, and reforms that address the structural weaknesses in the financial system.”
It is the considered view of Dr. Atuahene that the government focus on building a stable and resilient macroeconomy rather than a policy which can hardly survive in the current economy.
