BoG to establish Enterprise Credit Scheme to support SMEs

As part of efforts to make access to credit much easier for Small and Medium Enterprises, SMEs, particularly in the agricultural value chain, the Bank of Ghana has announced the establishment of an Enterprise Credit Scheme to support SMEs to secure funding from local banks.

Access to credit remains one of the major bottlenecks for SMEs in Ghana.

The Second Deputy Governor of the Bank of Ghana, Elsie Addo Awadzi, made this known during the launch of a program, spearheaded by the Ghana Incentive-based Risk System for Agricultural Lending (GIRSAL) with assistance from the National Banking College, to train banks and other financial institutions with the requisite practical knowledge and skills to enable them increase financial access to agriculture and agribusiness organizations.

The training program will also build the capacities of the staff of the beneficiary institutions to appropriately appraise agricultural projects that require funding to reduce the issue of non-performing loans.

Elsie Addo Awadzi, who admitted the financial perception of agric being a high risk venture encouraged banks and other financial institutions to adopt strategic mechanisms to change the narrative given the enormous contribution of the agric sector to the country’s Gross Domestic Product (GDP).

Data available to the Bank of Ghana indicates that as of January 2019, the agric sector’s contribution to non-performing loans in the banking sector stood at 9.44 percent. 22 percent of loans to the agric sector also stood at non-performing. This is quite high. This feeds into the perception that lending to the sector is very risky. But we must not be deterred by these numbers. There is a lot that can be done to recover these loans, because access to credit remains a critical factor for sustainable growth in the agric sector in Ghana” she noted.

Enterprise Credit Scheme

According to Elsie Addo Awadzi, an amount of about GHS 2 billion has been projected to implement the Enterprise Credit Scheme initiative, which will be accumulated from a 2. 0 per cent of the primary reserve kept by the banks.

“The Bank of Ghana has decided to set up an enterprise credit scheme by March. This is a scheme that will be funded by a 2.0 percentage of the primary reserve that is kept by the banks. At our current estimate, there is a pool of about GHS 2 billon that will be available to enable the banks to tap into, to allow the banks lend to SMEs which will include agricultural businesses. We are working on modalities to ensure that this scheme is operationalized very soon.”