Stanbic Bank boss faults businesses - Over harsh credit regime

The Managing Director of Stanbic Bank Ghana is asking the private sector to look within for solutions to the low flow and high cost of credit to businesses. Maxwell Adombila Akalaare and Jessica Acheampong report

The Managing Director of Stanbic Bank Ghana, Mr Alhassan Andani, has identified financial indiscipline among private and public sector institutions, bad corporate leadership and wrong pricing of government securities as the bane of credit flow to businesses in the country.
Such practices, he said, lowered the confidence of financial institutions in the private sector and cause them to hold on to their credit or at best channel it into other investments rather than lending to businesses.
"From where I stand as a banker, it's the level of corporate governance and indiscipline in the private sector that is the problem and not the banks."
"Banks have no other place to play than to play with the private sector but we are sometimes cautions of the kind of leadership in the private sector in this country," Mr Andani said at a breakfast meeting with Chief Executives and captains of industry in the country.
The meeting, dubbed:  'Breakfast Meeting With CEOs,' was an initiative of the Ghana Chamber of Commerce and Industries' (GCCI).
The meeting  was under the theme 'Moving from a lower middle income to upper middle income; the role of the private sector'
The event  brought together captains of industries, the academia and government officials to deliberate on the concerns of businesses and suggest ways of minimising them.
The Stanbic Bank MD, the Chief Executive of the KAMA Group of Companies, Dr Michael Agyekum Addo; and the Dean of the University of Ghana Business School (UGBS), Prof. Kwame Ameyaw Domfeh; were the resource persons.
Speaking on the topic 'Financing the the private sector; the role of banks,' Mr Andani said although banks were more willing to lend  to businesses to grow, lack of optimism among the private sector "to grow beyond their little territories" hindered the level of financial intermediation.
"We (banks) often do not see the optimism and prospects in our companies.
"Globally, the private sector is regarded as the most discipline but can the same be said of Ghana? Financial discipline and corporate governance here is not up to standard and that makes us (the banks) cautious in our dealings," Mr Andani said.
His comments come in the midst of heightened complaints from the private sector that banks and non-banks are insensitive to the credit plight of businesses in the country.
The soaring interest rates, which currently averages at about 27 per cent, and less flow of credit to the private sector have dominated such discussions with some business concerns calling for a regulated interest rate regime.
Mr Agyekum-Addo said at the meeting that private sector growth was constantly impeded by the limited and high cost of credit from banks, noting that the few banks that lend to businesses do that under stringent measures.
"Their borrowing rates are high and if you are unable to repay, they come chasing you."
"Of late, they are even sell people's properties because that is what they used as collateral knowing that if you default, they will rely on something," the KAMA Group CEO said.
"It's about time we also went on strike to force the banks to lower their rates because it seems thats the only way that will make them listen," he said in a presentation titled 'Creating an enabling environment for the private sector to thrive.'
The Stanbic Bank boss, however, disagreed, citing the private sector's inability to conscientiously expend loans on areas for which they were taken and manage their internal finances properly as the causes.
Taking inspirations from the Akan song which translates into 'money is blood,'  Mr Andani said any improper handling of cash by a private or public institution would affect the operations of that institution but consequently "poison the entire system"
“For example, if you lend to people, and they default, you will see it at your level but we as bankers  would see it at the portfolio or group level. That affects quality and it deteriorates the ability to repay,” he said.
The non-performing loan (NPL) ratio, a per centage of total loans disbursed over defaulting ones, currently stands at about 13.5 per cent, down from about 20 per cent a year ago, data from the Bank of Ghana showed.
However impressive that may, Stanbic Bank's MD said more still needed to be done to bring the rate down if more credit is needed to fuel growth in the private sector.
He called for a wholistic approach to financial management in the country, noting that "if one part of the economy is affected by bad financial management and corporate indiscipline, the whole system suffers."
"Let's collectively look into financial management and stop pointing accusing figures," he said.
Mr Andani also lashed out on government for indirectly pushing interest rates up by pricing its Treasure Bills high while private sector reels under the pressures of insufficient funding.
Reacting to concerns by the participants on high interest rates, the Stanbic Bank MD said although government borrowing from the public is seen as less risky and can therefore be done at a low or moderate rate, the Ghanaian government had decided to do that at a higher rate, forcing commercial banks to follow.
"If you sitting here were the chairman of my company and the government is borrowing at 23 per cent yet the private sector wants me to lend to them at 15 per cent and I did that, what would as my chairman say to me? A bad manager of course," he said.
He thus called on government to take a second look at its borrowing rates, taking into consideration the various parameters that guide the setting of treasury bill rates.
On other sources of funding to businesses, Mr Andani advised that businesses float part of their stake on the Ghana Stock Exchange (GSE) to help open up their ownership and attract more capital.
"My recommendation is that let the GSE flourish. For those who have companies, let's put them on the exchange and attract more capital; capital that is sitting there not just with the banks alone but also with other individuals willing to invest," he added.GB