BoG urges businesses to unlock collateral for easier access to credit

The Bank of Ghana (BoG) has urged businesses, particularly small and medium-sized enterprises (SMEs), to take advantage of the country’s collateral registration system to improve their access to credit and negotiate better lending terms with financial institutions.

This would help businesses grow in profitability and improve their financial systems.

Mr. Alexander Koomson, speaking on behalf of the Head, Collateral Registry Department at BoG, said limited awareness of the country’s credit infrastructure remained one of the factors constraining businesses from fully leveraging their assets to secure financing.

He was speaking at a sensitisation programme on the “Borrowers and Lenders Act, 2020 (Act 1052)” and the operations of the Collateral Registry Department in Kumasi. The programme, organised as part of the Bank’s continuing stakeholder engagement, brought together business owners, entrepreneurs, traders, manufacturers and representatives of the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce and Industry (GNCCI).

Mr Koomson explained that the enactment of Act 1052 and the operationalization of the Collateral Registry Department were intended to address longstanding challenges in the credit market, including inadequate acceptable collateral, information asymmetry, and weaknesses in the enforcement of security interests.

“Limited awareness of this credit infrastructure system and the processes that govern them, as well as how the system can be effectively leveraged to support business expansion, could defeat the intended purpose of this regime,” he said.

The BoG, he noted, was therefore committed to continuous stakeholder engagement and public education aimed at strengthening trust and confidence in the credit system.

Mr Koomson, explained that credit remained critical to the lifecycle of businesses because it supports expansion, strengthens value chains, and contributes to job creation and inclusive industrial growth.

However, he said, access to credit had historically been constrained by the inability of businesses to provide acceptable collateral and by deficiencies in the systems governing secured lending.

The Collateral Registry Department established following the passage of Act 1052, is intended to provide a framework through which security interests in movable and other eligible assets can be registered, thereby enabling businesses to use their assets to support borrowing.

For many SMEs, this could include equipment, inventory and receivables that may otherwise remain underutilized when seeking financing.

The Ashanti Regional Chairperson of the GNCCI, Mr. Edward Yaw Afriyie, indicated that the sensitisation programme was particularly important because many businesses remained unclear about their rights and obligations when dealing with lenders.

He said greater knowledge of the law would enable entrepreneurs to better understand lending agreements, collateral requirements, and the mechanisms available to them under the Act. He said the timing of the engagement was also significant given developments in monetary policy and lending conditions.

While acknowledging that lower lending rates could potentially support business expansion, he noted that the benefits of changes in monetary conditions were not always immediately apparent to SMEs at the point where they sought financing from banks.

“The gap between the headline and what actually happens at the bank counter, or in the hands of a lender assessing our collateral, is a gap that keeps far too many businesses from getting the financing they need to grow,” Mr Koonson said.

Mr William Agyei-Manu, the Agricultural Sector Chairman of the AGI, also encouraged entrepreneurs to pay close attention to the technical presentations on Act 1052 and the Collateral Registry.

Drawing on his own experience as an entrepreneur, he said access to funding could be particularly challenging for SMEs seeking to expand into new markets.

He noted that many businesses owned assets but could face difficulties using them as collateral because of incomplete documentation, land-title issues, or other registration challenges.

Mr Agyei-Manu urged businesses to take steps to properly document and register their assets, saying financial literacy and knowledge of the credit system were increasingly important for improving access to finance.

GNA

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