Banks in the better position to disburse GH¢600 Stimulus Package - Economist

Banks in the better position to disburse GH¢600 Stimulus Package - Economist

A Financial Economist, Dr Lord Mensah, has backed earlier calls for the government to channel the GHS600 million stimulus package through the banks.

The package is meant to alleviate the plight of Small and Medium Enterprises (SMEs) amid the impact of the COVID-19 pandemic.

In his argument, disbursing of the fund should go through financial institutions to enhance transparency and efficiency.

The National Board for Small Scale Industries (NBSSI) has already announced that it will deploy an electronic portal to receive applications to aid in the disbursement of the 600 million Cedis fund.

In a similar light, the Chief Executive of Dalex Finance, Ken Thompson, has also kicked against the move, stating that the funds can only be better disbursed by financial institutions.

Adding his voice to the call, Dr Lord Mensah said the banks will be able to do a better job since they are already providing loans to Small and Medium-scale Enterprises.

“One of the ways will be that the stimulus package can rather be channelled through the banks,” he said, adding that it will be a better move compared to the demands for banks to suspend interest payments on loans.

Dr Mensah argued that it will be unviable for the Bank of Ghana to compel banks to suspend interest payment since banks also pay interest on loans they acquire.

“If they stop loan service, obviously it’s going to have problems as far as banking system is concerned because remember sourcing for funds is difficult for these banks in this country,” he emphasized.

The demand for banks to suspend interest payment on loans was first made by the Ghana Union of Traders Association(GUTA) to help reduce the financial burden on their members due to the COVID-19 pandemic.

But according to The Economist, the proposal is unsustainable. In the words of Dr Mensah, he said:

“these are banks that are taking hard conditions from individuals around and from other businesses around, so if they should suspend loan service it’s going to affect them because they also have to service where they took the money from if you understand banking very well”.