High lending rates hamper Ghana’s industrial progress– Economist
By Solomon Nartey Tetteh
Development economist Felix Larry Essilfie has warned that Ghana’s persistently high cost of borrowing is preventing the country from achieving meaningful industrialisation and value addition in key sectors.
In recent years, Ghana has grappled with high lending rates, which many economists and business leaders say are stifling industrial growth.
Despite government initiatives to boost local production and value addition, the cost of credit remains among the highest in sub-Saharan Africa, often exceeding 30 per cent annually for commercial loans.
Speaking on the Business Breakfast Show on Zed 101.9 FM, Dr Essilfie said Ghana’s current economic structure is widely acknowledged to be underperforming, yet businesses are unable to transition into large-scale manufacturing due to prohibitively high lending rates.
“If the cost of borrowing is affordable, people can invest in industrialisation, manufacturing and value addition. But when lending rates are too high, such investments become impossible,” he explained.
Dr Essilfie pointed to the cocoa and gold industries as examples, noting that Ghana continues to export raw commodities instead of processed products that could fetch higher returns.
Affordable credit, he argued, would enable private entrepreneurs to enter joint ventures, secure financing and establish refineries, creating jobs and boosting the value chain.
“In other countries, private investors have set up refineries that generate thousands of direct and indirect jobs. We could do the same if the cost of capital was manageable,” he said.
The economist cautioned that the current environment forces many entrepreneurs to operate small-scale tabletop or roadside businesses, often relying on microfinance institutions that charge exorbitant interest rates.
These microfinance operators, he noted, justify the high rates as a way to protect their funds, but the terms often cripple small businesses before they can grow.
Dr Essilfie stressed that lowering lending rates is critical if Ghana is to break out of its dependence on raw exports and build a stronger, more diversified economy.
