Economic Analyst Calls for Expanded Credit Support for Small Businesses
By: Solomon Nartey Tetteh
Economic analyst Emmanuel Boateng has urged the government to take bold steps to make financing more accessible and affordable for micro, small, and medium-scale enterprises (MSMEs), which he described as the backbone of Ghana’s economy.
Speaking on the Business Breakfast on Zed 101.9FM, Mr. Boateng identified high interest rates and stringent collateral requirements as major obstacles preventing small businesses from accessing credit from commercial banks.
“Affordable finance remains the top concern for businesses, especially MSMEs, who struggle to secure loans due to high interest rates and the demand for substantial collateral,” he said.
Mr. Boateng recommended that the government expand its credit guarantee schemes in the upcoming national budget to cover more sectors such as agriculture and technology.
“By extending government-backed credit guarantees to these sectors, we can encourage commercial banks to lend more to smaller enterprises,” he explained.
He further proposed that interest rate subsidies be aligned with broader monetary policy adjustments to make a real impact.
“A one percentage point drop in the policy rate translates into about a 0.4 percentage drop in the Ghana Reference Rate, which serves as the benchmark for pricing credit. This means that policy changes can directly reduce borrowing costs for businesses,” he noted.
The analyst also called for government support to microfinance institutions that serve informal sector businesses. He suggested offering tax incentives to enable these institutions to provide loans at more reasonable rates.
“When you look at some of the rates at which small businesses borrow, it’s outrageous. Some microfinance institutions charge excessively high interest rates, and this is why government intervention is crucial,” he stressed.
Mr. Boateng emphasized that implementing these measures could significantly boost access to credit, stimulate growth, and empower small businesses to contribute more meaningfully to Ghana’s economic development.
Economic Analyst identified credit guarantee schemes as a potential game changer in unlocking access to private sector credit, particularly for high-risk sectors such as agriculture and startups.
Mr. Boateng also explained that such schemes could help reduce the risks associated with lending, making financial institutions more willing to extend credit to businesses that traditionally struggle to secure funding.
According to him, startups and agricultural enterprises often face significant challenges in accessing credit due to the perceived risk of low repayment rates. Mr. Boateng also called on the Agricultural Development Bank (ADB) to fully embrace its mandate of supporting agricultural financing to strengthen growth in that sector.
He further emphasized the need to expand the scope of credit guarantee schemes beyond a few selected industries to promote inclusive growth.
