President of the Ghana Union of Traders Association (GUTA), Dr Joseph Obeng, is accusing financial institutions of unfairly burdening businesses with exorbitant interest rates under the pretext of high non-performing loans (NPLs).
Dr Obeng explains that he cannot fathom why banks are punishing businesses with high interest rates under the guise of high NPLs, which he insists are largely the result of the banks’ own inefficiencies, lack of due diligence, and even corrupt practices.
Speaking with a lot of frustration, the President of GUTA questioned how banks arrive at their NPL figures in the first place. According to him, many of these so-called bad loans could be avoided if banks conducted proper due diligence before lending.
In addition, the already high interest rates charged by the banks also play a significant role in the rising NPLs since businesses cannot pay.
He therefore insists that lumping on these inefficiencies together to punish all clients through high interest rates, he believes, is unfair and untenable.
The GUTA president argued that instead of punishing all borrowers with high rates, banks should reward those who honour their repayment obligations and isolate the cost of defaults to the actual defaulters.
“They lump everything together, their own inefficiencies, their lack of due diligence. How do you say that there are non-performing loans? You should have done your own due diligence to check these non-performing loans and then fix your rates, subject to the different consumers,” he said in an interview monitored by The High Street Journal.
He continued, “You reward the one who is paying and then punish the one who is not paying. In any case, how do you arrive at these numerous non-performing loans? It’s because of a lack of due diligence. So they cannot put all their efficiencies together, some corruptible practices, put them all together and push it onto their consumers or their clients. That is not fair.”
He urged the Bank of Ghana to step in, warning that the current interest rate environment is crippling productivity and undermining Ghana’s competitiveness in the sub-region.
He stressed that Ghana’s economic growth depends heavily on a vibrant private sector, which in turn requires affordable credit.
“Bank of Ghana has to come in and check. Otherwise, we are not being competitive in the sub-region. The cost of borrowing is just too high. It’s not helping productivity at all. And so if we can thrive as a nation, we have to check that area, the cost of borrowing. Because even if they are talking about non-performing loans, it’s as a result of high interest rates that businesses normally cannot pay,” he noted.
His remarks add to mounting calls for a deep restructuring of Ghana’s credit system to align lending practices with business realities, rather than allowing banks to pass the cost of their mismanagement onto the productive sector.
