Chief Executive Officer of the Ghana Bankers Association (GBA), Mr. John Awuah, has kicked against a proposal to cap interest rates to tame the off-handle headache for borrowers.
He warns any such move would be vandalism of the natural laws of the market and probably end up creating a worse monster for the banking sector.
“Any suggestions or any discussions of capping interest rates should be of a concern because it has a probability or propensity to be counterproductive and can really result in unintended consequences,” he warned.
“You can sight the example that we have seen in Africa where Kenya after three unsuccessful attempts at introducing interest rates cap, it finally introduced caps on interest rates in 2016, only to make a U-turn in 2019 going back to free-market-determining lending rates. You can’t run away from market fundamentals”, he told Accra-based Joy Fm.
His protest comes days after President Akufo-Addo expressed concern about high interest rates in the country during an inauguration of the Board of the Bank of Ghana.
But the suggestion to cap interest rates had been made by the Institute of Economic Affairs which believes this will tame the cost of credit.
In the last five years, lending rates have trickled from an average of 29% to about 20.5%.
President Akufo-Addo was unhappy that constantly the bank rate is not that high and yet the interest rates are so high, charging the BoG to tackle the problem.
The Bankers Association CEO agrees: “as a country, we should all rally behind policymakers in their efforts towards a move to lower market interest regime. And banks will not have anything to do than to follow suit as we have done.”
Mr. Awuah said “I think the discussion should be on what can we do more about what we’ve done in the last three or four years that has resulted in market rates coming down, policy rate trending downwards, T bills trending downwards, and all the other rates have followed suit. Lending rates is one of the rates and automatically that will also follow.”