Ghana businesses face 120% collateral barrier for loans
The Association of Ghana Industries says high loan security demands prevent firms accessing credit despite falling interest rates.
Businesses in Ghana are struggling to get bank loans because lenders demand collateral worth up to 120% of the borrowed amount. Eric Defor, Chairman of the Economic Affairs Committee of the Association of Ghana Industries (AGI), stated this on Wednesday, November 11. He noted that despite improved liquidity and lower interest rates in the financial sector, these high collateral requirements remain a significant hurdle for companies needing credit to grow.
Mr Defor explained that while banks have more funds available, partly due to the repayment of obligations from the Domestic Debt Exchange Programme, accessing these funds is difficult. He highlighted that some banks are now asking for security valued at nearly 120% of the loan amount. He acknowledged banks' caution following Ghana's financial crisis but argued that these lending conditions hinder businesses from benefiting from the improving economy.
The AGI official urged the government to address these constraints as it prepares the 2027 Budget. He also called for more transparency on where banks are directing their funds, expressing concern that money might be flowing into government securities instead of business lending. Mr Defor stressed the need for reliable data to understand the flow of funds, especially considering the Bank of Ghana's liquidity management operations.
Why it mattersGhanaian businesses are unable to secure loans for expansion due to excessive collateral demands from banks.