?BoG to establish GH¢ 2 billion scheme for SMEs

The Bank of Ghana (BoG) is establishing a GH¢ 2 billion scheme to provide credit support for Small and Medium-scale Enterprise (SME).

The Governor of the Bank of Ghana, Dr Ernest Addison, who announced this at the 91^st regular meeting of the Monetary Policy Committee (MPC) of the BoG said the move was to revamp and support the growth of the SME sector.

“This is a deliberate effort of the BoG to support SMEs,” Dr Addison said.

He explained that the BoG was setting aside two per cent of the  of the primary reserves of banks to support targeted lending to SMEs as part of the Enterprise Credit Scheme announced in the 2020 budget.

“These funds will be held at the BoG and will be available to banks that participate in the scheme,” he said.

To support and strengthen the growth of credit to the private sector, the BoG was exploring the possibility of setting a minimum loan to deposits ratio to ensure that more deposits mobilised by banks were channelled to viable private sector projects.

“The BoG will hold further consultations with the banking industry to determine the impact of such a regulatory measure if warranted, determine the level of such a  ratio and appropriate monitoring and enforcement mechanisms to promote its effectiveness,” he said.

Dr Addison said the effort to strengthen credit to the private sector, was to reinforce the existing credit infrastructure by strengthening enforcement of the credit bureau system under proposed Regulations to be made by Parliament pursuant to the Credit Report Act of 2007 (Act 726).

The Governor said the move by the BoG was to further strengthen the collateral enforcement mechanism under a new Borrowers and Lenders Bill to improve the quality of loans made by banks as well as facilitate recovery of loans and collateral.

Dr Addison disclosed that BoG was to come out with a policy which would align compensation for Chief Executive Officers (CEOs), Board of Directors and key management personnel of banks with performance of the bank.

He said the move was to ensure that banks did not pass on their operational inefficiencies and overhead cost to their clients, pointing out that CEOs, Board of Directors and key management staff who presided over poor assets and high non-performing loans, could not be paid so much.

“The BoG will be working closely with banks to ensure that banks do not pass on their operational inefficiencies and overhead costs to their clients.  To do this, steps will be taken to align compensation with overall bank performance by linking it to clear parameters including the quality of a bank’s assets,” he said.

 The Governor said banks would be required to publish Value Added Statements disclosing details of the compensation packages of key management personnel and Board of Directors separately from total employee compensation.

Dr Addison explained that the receivers for the nine defunct banks had so far recouped GH¢1 billion, leaving GHC¢9 billion.

He said  that so far about 95 per cent of the customers of the defunct banks had been paid, pointing out that the remaining five per cent were yet to be paid because their funds with the banks are above the GH¢20,000  ceiling set by the BoG.

By Kingsley Asare

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