Chief executive officer of the Ghana National Chamber of Commerce and Industries (GNCCI), Mark Badu-Aboagye, has welcomed the move by commercial banks to provide loan facility to contractors for projects in spite of high non-performing loans.

Reacting to statement by former President of the Bankers Association of Ghana, Alhassan Andani, that commercial banks will continue to fund projects despite moves to scale back on lending as a results of high non-performing loans, he expressed optimism for the banks to have “strong books” to be able to support businesses that would want to borrow from them, in spite of the increase in non-performing loans.

“I think it’s good news. If any business has the potential to expand in spite of the current economic challenges, then there’s an assurance that you’ll get the loan and the facility that you need then of course, it’s good news for businesses. But it’s coming from somebody who is probably not in the banking system now in terms of providing the facility. I hope the banks are listening…”
Mark Badu-Aboagye

Commenting on the surge in non-performing loans, Mr Badu-Aboagye stated that he is not really surprised with the increase in non-performing loans. He explained that any economy that is going through the macroeconomic crisis that the country is currently facing will mean that non-performing loans will go up.

“If you look at the background of our challenges where the policy rate keeps increasing, invariably the interest rates are also going up. So, definitely, it becomes extremely difficult for anybody who borrows with this high interest rate to be able to pay back when they themselves are not making enough money because the cost of production is also going up.”
Mark Badu-Aboagye

Furthermore, Mr Badu-Aboagye noted that although it’s a difficult situation, he hopes banks will indeed step in to fund projects. He highlighted that before banks give loan facility to anybody, they have to assess the risk profile of the business and their ability to pay.

Additionally, he revealed that there is also the need to consider the bank’s books, their ability to also absorb any non-performing loans within their books and based on that they’ll be able to provide loans to businesses.

Contracting loans from banks

Commenting on banks engagement with government to see how debt owed contractors can be paid on time, the CEO of GNCCI expressed that such discussion portends great news for the industry players.

He highlighted that as it stands now, a lot of these contractors who have completed work for government have not received payment for the work undetaken.

Moreover, he lamented that some of the GNCCI members have been going through difficult moments as a result of non-payments by government.

“I know those who have passed on because they have taken loans and they have not been able to pay, and the banks are on them… So, if the government can take up this bold decision that they’re going to pay these contractors, of course, the monies will go through the banks, and it means the banks will also get their liquidity to be able to lend to other businesses who will be also willing to take facilities from them. So, it’s a very good news for us, especially those who are into the construction subsector.”
Mark Badu-Aboagye

Justifying his stance, Mr Badu-Aboagye revealed that a closer look at the GDP for the first and last quarter, saw that the construction sector contracted because a lot of them had done work for which they haven’t been recompensed.

In light of this, he stated that these contractors don’t even have the money to go on and expand and engage in more jobs.

“So, once the government is giving them the money, they can expand and the jobs that are hanging – the unfinished ones, they will be able to complete it once government assures them that they’re going to get their monies…”
Mark Badu-Aboagye