The Bank of Ghana (BoG) has urged businesses, particularly small and medium-sized enterprises (SMEs), to take advantage of the country’s collateral registration system to improve their credit access and negotiate better lending terms with financial institutions.
The call was made during a sensitisation programme on the ‘Borrowers and Lenders Act, 2020 (Act 1052)’ and operations of the Collateral Registry Department in Kumasi.
The programme, organised as part of the Bank’s continuing stakeholder engagement, brought together business owners, entrepreneurs, traders, manufacturers and representatives of the Association of Ghana Industries (AGI) and Ghana National Chamber of Commerce and Industry (GNCCI).
Alexander Koomson, speaking on behalf of Head-Collateral Registry Department, BoG, Fred Asiamah-Koranteng, said limited awareness of the country’s credit infrastructure remains one of the factors constraining businesses from fully leveraging their assets to secure financing.
He said the enactment of Act 1052 and operationalisation of the Collateral Registry Department are intended to address longstanding challenges in the credit market, including inadequate acceptable collateral, information asymmetry and weaknesses in the enforcement of security interests.
“Limited awareness of this credit infrastructure system and the processes that govern them, as well as how the system can be effectively leveraged to support business expansion, could defeat the intended purpose of this regime,” he said.
The Bank, he noted, is committed to continuous stakeholder engagement and public education aimed at strengthening trust and confidence in the credit system.
Mr. Koomson, explained that credit remains critical to the lifecycle of businesses because it supports expansion, strengthens value chains and contributes in job creation and inclusive industrial growth.
However, he said, access to credit had historically been constrained by the inability of businesses to provide acceptable collateral and by deficiencies in the systems governing secured lending.
The Collateral Registry Department, established following the passage of Act 1052, is intended to provide a framework through which security interests in movable and other eligible assets can be registered – thereby enabling businesses to use their assets for supporting borrowing.
This could include equipment, inventory and receivables for many SMEs which may otherwise remain underutilised when seeking financing.
Meanwhile, Ashanti Regional Chairman-GNCCI Edward Yaw Afriyie, in a speech, said the sensitisation programme was particularly important because many businesses remain unclear about their rights and obligations when dealing with lenders.
He said greater knowledge of the law will enable entrepreneurs to better understand lending agreements, collateral requirements and the mechanisms available to them under the Act.
“An informed borrower is a protected borrower. Knowledge of the law can give business owners greater confidence when negotiating with financial institutions,” Mr. Afriyie added.
He said the engagement’s timing was also significant, given developments in monetary policy and lending conditions.
While acknowledging that lower lending rates can potentially support business expansion, he noted that the benefits of changes in monetary conditions are not always immediately apparent to SMEs at the point where they seek financing from banks.
“The gap between the headline and what actually happens at the bank counter – or in the hands of a lender assessing our collateral – is a gap that keeps far too many businesses from getting the financing they need to grow,” he said.
Businesses urged to formalise assets
Agricultural Sector Chairman-AGI William Agyei-Manu also advised that entrepreneurs should pay close attention to technical presentations on Act 1052 and the Collateral Registry.
Drawing on his own experience as an entrepreneur, he said access to funding can be particularly challenging for SMEs seeking to expand into new markets.
He noted that many businesses possess assets but can face difficulties using them as collateral because of incomplete documentation, land-title issues or other registration challenges.
Mr. Agyei-Manu urged that businesses take steps to properly document and register their assets, saying financial literacy and knowledge of the credit system are increasingly important for improving access to finance.
He then commended the Bank of Ghana for taking its sensitisation activities beyond Accra and engaging directly with businesses in the regions.
SOURCE: B&FTIMES
