National ID to Reduce Loan Interest Rates – Bawumia
The Vice President Alhaji Mahamudu Bawumia has said the introduction of the identification cards will reduce loan interest rates in the country.
According to the Vice president, banks are unable to lend at low rates because of the risks associated with lending to an unknown quantity, hence Government’s decision to introduce measures such as the National ID card and the Digital Property Addressing system to make it easier to identify and trace borrowers and thereby reduce the risk premium.
He made this statement at the 21st National Banking Conference held in Accra yesterday.
The average interest rate of 29% on loans in Ghana as at September 2017 is among the highest in Africa, with banks citing the risk of default as a major factor. In contrast, borrowers in Botswana pay about 7%, while Mauritian banks charge an average of 8.5%. South African banks charge an average of 10.25%, according to figures from their central banks.
Dr. Bawumia said the issue of interest rate has been a challenge and government intends to bring it down sustainably.
“There is no unique ID for an individual customer. You don’t know exactly what their history is whether they have changed their identity, or taken a loan from a bank and has never paid.
“If we cannot identify individuals in our economy and also identify where they live it becomes a very chaotic environment and therefore the risk will continue to be high”, he said.
Dr. Bawumia said government’s intentions is to make the country a financial services hub in Africa.
This, he said will enable the country adopt a sustainable approach to financial integration for a development structures, institutions and human resources.
According to him, there are key advantages in the country that makes it possible to be the financial services hub.
“The whole process of digitization that you are seeing is all part of the reforms and it will help the banking industry”, he stressed.
The theme for the conference dubbed “Building a Robust and Sustainable Banking System in Ghana”, was organized by the Chattered Institute of Bankers to enable key stakeholders deliberate on ways of building a robust banking system.
Source: Emmanuel Yeboah Britwum/thePublisher