Banks sitting on cash but squeezing businesses with 120% collateral demands, AGI warns

Ghanaian businesses are struggling to access bank loans even as the country's financial sector enjoys improved liquidity and declining interest rates, the Association of Ghana Industries (AGI) has warned. The chairman of AGI's Economic Affairs Committee, Eric Defor, says the fundamental problem is not whether banks have money — they do — but whether businesses can meet the punishing conditions attached to borrowing, including collateral requirements of nearly 120 per cent of the loan amount being sought.

Banks flush with funds, yet industry locked out

Speaking on Joy News' PM Express on Wednesday, 11 November, Mr Defor painted a picture of a financial sector that has recovered in terms of balance sheets but has not translated that recovery into productive lending. He pointed to the government's ongoing repayment of obligations under the Domestic Debt Exchange Programme (DDEP) as a key reason banks are now well-capitalised.

"The banks are awash with money now," he said, crediting DDEP repayments for strengthening their financial position. Yet he was equally direct about the gap between availability and accessibility. "Access is not very easy. They have money, but accessing the funds is not that easy, even though the interest rates have come down," he said.

The collateral issue, he argued, is particularly crippling. Requiring a business to pledge assets worth 120 per cent of what it wants to borrow places an almost impossible burden on small and medium enterprises that may lack sufficient registered property or formal assets to offer as security. Many such businesses are the backbone of Ghana's industrial output, yet they remain effectively locked out of formal credit.

Mr Defor also raised concerns about where bank funds are actually going, suggesting that some institutions may be channelling available liquidity into government securities rather than lending to productive businesses. He called for clearer, more reliable data on sectoral credit allocation so that policymakers and industry bodies can hold financial institutions to account.

Why it matters for Ghana

Ghana's economy is at a delicate but potentially pivotal moment. After years of fiscal stress, currency depreciation, and the painful restructuring of domestic debt, there are genuine signs of stabilisation — inflation has eased, the cedi has shown relative calm, and the Bank of Ghana has worked to keep key indicators under control. Mr Defor acknowledged these improvements and even commended changes to the Value Added Tax (VAT) structure for helping reduce business production costs.

But stabilisation alone does not drive growth. For Ghana to move from recovery to expansion, businesses must be able to invest — in machinery, in raw materials, in workers — and that requires access to affordable credit. If banks continue to operate with risk appetites shaped by the worst of the financial crisis, the broader economic recovery will struggle to reach factories, farms, and workshops.

The AGI's warning also comes at a critical political moment. Finance Minister Dr Cassiel Ato Forson was due to present the 2027 Budget to Parliament on Thursday, 12 November, and Mr Defor explicitly called on the government to use that opportunity to address the financing constraints facing industry. Without targeted interventions — whether through credit guarantee schemes, development finance institutions, or regulatory guidance on collateral standards — lower interest rates risk becoming a headline figure that never reaches the shop floor.

What needs to change

Industry stakeholders are looking for concrete measures in the budget cycle that go beyond macroeconomic management. Among the key asks:

• Reform of collateral requirements — either through government-backed guarantee schemes that reduce the security burden on borrowers, or through regulatory pressure on banks to adopt more flexible lending criteria.
• Transparent credit data — clarity on which sectors are receiving bank lending, and how much liquidity is being absorbed by government instruments rather than the private sector.
• Targeted support for industry — mechanisms that channel credit specifically to manufacturing and production, not just commerce or real estate.

The broader message from AGI is that economic recovery must be felt by those who produce goods and create jobs, not just reflected in improved bank balance sheets. As Ghana looks ahead to 2026 and beyond, closing the gap between financial sector liquidity and real-economy lending will be one of the defining economic challenges for the government to address.