Make innovation core of financial intermediation—Says risk management consultant

April 16
Story: Kwame Asare Boadu, Kumasi
A CORPORATE investment and risk management consultant, Dr Samuel Frimpong Boateng, has urged banks in the country, particularly the public ones, to be innovative and creative in the delivery of financial services to ensure competition to reduce interests on credit.
He said it was time to move from a subsidy based operation to value-added processes to transform banks such as the Agricultural Development Bank (ADB) from a mere market player to market leader and a benchmark for investment banking.
He said such innovations should take cognisance of the numerous challenges in providing capital and financial access to small- and medium-scale enterprises (SMEs), agribusiness and farmers in rural areas.
Dr Boateng, who is also the Chief Executive Officer (CEO) of Africa Investments and Development Group (AFRIDEG), a subsidiary of Global Investments and Corporate Solutions, London, told the Daily Graphic in Kumasi that “a more structured financial approach will offer the agribusiness and SME communities increased value and support the institutional development in the financial system”.
He indicated that “traditionally loan portfolios have been heavily subsidised with the original assumption that enhanced funding would encourage an increase in credit to farming, which is mostly concentrated in the primary sector”.
Dr Boateng stated that the effect of trade liberalisation on agriculture and commodities had increased risk perception in the banking sector.
“Lenders in the industry have priced this perception — greatly distanced from business reality — and sold finance to the poor farmer and other businesses at unacceptably high rates”, he said.
He emphasised that there was no way a business, whether farming or non-farming, could attain improved capital and investment productivity and business growth with the type of financial costs borne by businesses in Ghana.
“That summarises the reason why most businesses are still at the subsistence level while authorities shower praises on the ‘killers’ who can price financial products as high as seven per cent a month,” he stressed.
The consultant suggested that the ADB be moulded into a two-tier bank and managed by the Bank of Ghana, adding: “If there is a constitutional friction in terms of mandate then there has to be a revision or a government-funded entity should take up the challenge”.