Modalities for Enterprise Credit Fund ready soon
By Elorm Desewu
By the next couple of months, the government would
complete the modalities with regard to the establishment of the Enterprise
Credit Fund, (ECF).
The allocation of two percent of the primary reserve
requirements into the Enterprise Credit Fund by the 23 universal banks would
amount to some GHC2 billion.
According to the governor of the Bank of Ghana, (BoG), Dr
Ernest Addison, “the modalities for accessing these funds are progressing
steadily and hopefully by next two months, we should have a clearer view of how
the banks can access these resources, which are targeted at SME lending”.
The Bank of Ghana is, for a start, exploring a number of
new prudential and market conduct regulatory measures to help foster more
competition in the banking sector and in the process help lower lending
rates:
To further provide increased activity in the small and
medium enterprise (SME) sector, the Bank of Ghana is setting aside 2 percent of
the banks’ primary reserve to support targeted lending to SMEs as part of the
Enterprise Credit Scheme announced in the 2020 budget. These funds will be held
at Bank of Ghana and will be available to banks that participate in the
scheme.
The Bank of Ghana is 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 are being taken to align compensation with
overall bank performance by linking it to clear parameters including the quality
of a bank’s assets. Bank of Ghana will also scrutinize compensation policies
for Chief Executive Officers and key management personnel as well as Board of
Directors of universal banks.
To ensure transparency, banks will be required to publish
Value Added Statements disclosing details of the compensation packages of key
management personnel and Boards of Directors separately from total employee
compensation.
To further deepen transparency in the determination of
lending rates, banks will be required to develop and publish a clear framework
on the risk premium build-up that impacts on an individual borrowers’ credit
profiles. This is expected to provide borrowers with a more-informed basis for
negotiating lending rates with their banks, and enhance transparency in the
credit delivery process as well as promote responsible credit behaviour from
borrowers.
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