Call from the private sector to reduce the cost of borrowing

Cost of borrowing

Private sector stakeholders are calling on the government to improve their access to credit by developing a long-term measure to support their operations through its support and that of financial institutions.

Dr William Godfred Cantah, economist and lecturer in the Department of Data Science and Economic Policy at the University of Cape Coast, explained that the cost of borrowing to invest in the business in the country is very high compared to to many other countries in the sub-region. Saharan Africa.

“This is an area the government should be looking at if it wants to profit from the AfCFTA. “

Together with other stakeholders, he made this call during a roundtable moderated by the Economic Governance Platform, held in Accra on the theme: “An assessment of the pathways to economic growth through which the sector private sector can help accelerate poverty reduction in the post-Covid-19 recovery period ”
He also called on the government to provide a regulatory framework for the operation of micro, small and medium enterprises (MSMEs), through the National Council of Small Industries, business advisory centers and metropolitan, municipal and district assemblies.

Dr Cantah urged the government to deliberately make certain activities the sole preserve of MSMEs to increase liquidity in the sector, such as free high school contracts, while also focusing on domestic investments.

The Economist also urged financial institutions to embrace data science and machine learning tools to develop an automated credit scoring system that assesses the risk of default before any commitment.

The private sector, he said, dominated economic activities in the three main sectors of the economy – services, industry and agriculture and accounted for over 80 percent of total employment in the economy. economy.

A review of the IBES (2017) and GLSS (2019) reports found that private sector employment was dominated by trade sub-sectors and that over 85% of private sector enterprises were classified as small and micro. businesses, which were mostly informal.

“So most of the people employed in the sector are in what is classified as vulnerable employment without social security or any form of social safety net,” he explained.

Despite efforts to reduce the size of the informal sector, Dr Cantah said data from GSS and NDPC revealed that the size of the informal sector had increased from 71.3% in 2014 to around 90% in 2017.

He pointed out that an increase in the size of the informal sector had implications for government revenue mobilization.

The private sector had contributed enormously to domestic mobilization through VAT and the payment of corporate tax.

“While we cannot directly link the increase in private sector activities to poverty reduction in Ghana, the mere fact that poverty levels in the country started to decline during the era of rising poverty. Private sector activities in the country is indicative of the essential role that the private sector plays in the development of the country, ”he said.

Dr Cantah lamented how the COVID-19 pandemic has affected almost all aspects of the private sector, including tourism, education, manufacturing, the creative arts, transportation and hospitality.

“For example, the hotel and restaurant services sector fell 34.8% and mining and quarrying fell 11%.

“Exporting companies also recorded a 64% drop in exports, while importers also recorded 85% of total imports (UNDS-2020). The informal sector’s GDP fell by almost one percent.

Although one percent may be insignificant, he said the informal sector is known to employ large numbers of low-productivity people. Therefore, such declines imply that several thousand people have been made redundant or income levels reduced.

A report from WIEGO, 2021 found that the daily incomes of market traders, street vendors, garbage collectors and kayayei declined on average by 45.9%, 92%, 90% and 99% respectively due to pandemic, he added.

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