Loan recipients and prospective ones should expect the rate of interest charged on the loans to come down following an easing in the benchmark interest rate, the 91-day Treasury bill.
According to an economist, chartered accountant and auditor, Dr Setor Amediku, going by the new formula the Bank of Ghana had agreed with commercial banks to use for determining their effective rates, borrowers should see the interest rates and loan repayment schedules reduce.
Dr Amediku, who handles some of the technical issues regarding the financial services sector at the Bank of Ghana, was speaking in his private capacity to an elite class of customers who come under the personal banking clientele of Stanbic Bank Ghana.
Stanbic Bank had brought that segment of their clientele – usually business owners and executives – to interact with them, receive feedback, while inviting experts to discuss issues on the economy, with emphasis on the opportunities available for the business community.
“I expect that the interest on loans should drop as per the new formula,” Dr Amediku said, making reference to the fact that the new formula commercial banks used in calculating interest rates now has interest rates of government papers as a variable.
The 91-Day Treasury bill started the year at around 23.03 per cent and the 182-Day bill at 22.99 per cent, with the 91-day ending the month at 22.80 per cent.
In August, when the country went for the US$1 billion Eurobond, both rates started easing and have since been trending downwards.
As of November 8, 2013, the 91-Day bill was 19.35 per cent, with the 182-Day settling at 19.25 per cent.
Banks and other financial institutions would rather invest in the government papers, such as the treasury bills, when their interest are high, therefore, hold back the funds that would have gone to individuals, businesses or institutions that want to borrow from them.
The best they do in such situations is to increase their effective interest rate above the government rates before lending to the public, thus making loan repayments biting on the borrower.
Dr Amediku encouraged the business executives and other entrepreneurs in the country to devise innovative means of keeping their businesses afloat and also take advantage of opportunities which exist in the economy, in spite of the challenges besetting it.
He said the challenges were partly due to the recession in some of the world’s advanced economies, as well as dwindling inflows from commodities due to global price reductions.
The local economy had also had its own challenges emanating from power crises and the recent hikes in utility prices which would have impact on general output in the economy, and consequently on government inflows and outflows.
The Chief Executive of Stanbic Bank Ghana, Mr Alhassan Andani, said the economy had a lot of prospects and local businesses should see the silver lining in the challenge and take advantage of them.
“We started the year with the 91-Day treasury bill at 23 per cent. But this has come down by about four basis points. The three-year and five-year are all congregating on the same line. So this means there is hope, especially for those who need longer term facilities,” Mr Andani said.
Mr Andani said from where he sat, he could see a lot of investor confidence in the economy and that the public discourse should focus on the positive sides of the economy and how to move things forward, rather than the cacophony of negative noise that hindered investor capital.