Paul Kofi Mante, Managing Director of EDC Investments Ltd, addressed business leaders in Accra on Tuesday. He argued that loans are not inherently harmful. Mante said loans remain a key feature of strong economies. The real issue lies in how borrowed funds are used. He warned that smart borrowing can build wealth. Emotional borrowing only creates stress. His comments come as Ghana's private sector navigates tight credit conditions. The Bank of Ghana reported a 15% year-on-year increase in private sector credit in 2023. Yet non-performing loans in the banking sector stood at 14.8% in December 2023. This creates a complex borrowing environment for businesses.

The Loan Paradox in Ghana's Economy

Ghana's economy grew by 2.9% in 2023 according to the Ghana Statistical Service. This growth requires capital investment. Many businesses turn to loans for expansion. The Ghana Investment Promotion Centre approved 423 projects in 2023. These projects required significant financing. Mante noted that successful companies use loans strategically. They fund specific growth initiatives. Unsuccessful borrowers often use loans for emotional decisions. They might cover operational gaps without a clear plan. The distinction determines financial outcomes.

Why It Matters

Access to credit shapes business survival in Ghana. The Ghana Revenue Authority collected GH¢106 billion in taxes in 2023. Businesses need capital to generate such economic activity. Loans provide that capital when equity isn't available. Mante's warning comes at a critical time. The Ghana Association of Bankers reported average lending rates above 30% in early 2024. High costs make borrowing decisions more consequential. A poorly used loan at high interest can cripple a business. A well-used loan can create competitive advantage. The difference lies in application, not the loan itself.

Practical Applications for Ghanaian Businesses

Mante suggested businesses follow clear borrowing principles. First, borrow only for revenue-generating activities. Second, match loan terms to project timelines. Third, maintain conservative debt-to-equity ratios. He pointed to specific examples in Ghana's market. Kasapreko Company Limited used strategic borrowing to expand its beverage production. The company secured facilities for new bottling lines. This created jobs and increased market share. Similarly, Blue Skies Holdings borrowed to fund cold chain infrastructure. This allowed expansion into European markets. Both companies used loans for specific, measurable growth projects.

What Businesses Should Watch

Ghanaian businesses should monitor several factors. The Bank of Ghana's monetary policy decisions affect lending rates. The central bank meets quarterly to set the policy rate. Businesses should also watch sector-specific credit programs. The Ghana EXIM Bank offers export financing at preferential rates. The Agricultural Development Bank provides seasonal loans for farmers. These programs represent strategic borrowing opportunities. Companies should avoid emotional borrowing during cash flow crunches. Instead, they should develop formal financing plans. These plans should align with business strategy. The Ghana Stock Exchange lists 42 companies. Public companies must disclose their borrowing patterns in annual reports. These disclosures offer valuable benchmarking data.

Regulatory Framework and Compliance

Business borrowing operates within Ghana's regulatory environment. The Bank of Ghana licenses all lending institutions. The Securities and Exchange Commission regulates corporate bond issues. Businesses seeking large loans must often provide collateral. The Lands Commission registers property used as security. The Office of the Registrar of Companies maintains corporate records that lenders review. Compliance adds cost but ensures transparency. Mante emphasized that proper documentation supports smart borrowing. It allows businesses to negotiate better terms. It also provides accountability for how funds are used.

The Path Forward

Ghana's business landscape continues to evolve. The Ghana Investment Promotion Centre targets $3 billion in foreign direct investment for 2024. Domestic businesses will need financing to partner with these investments. Mante concluded that loans are tools. Like any tool, their value depends on the user's skill. Businesses that master strategic borrowing will likely thrive. Those that borrow emotionally may struggle. The choice belongs to each business leader. The data suggests Ghana's economy needs both growth and financial discipline. Smart borrowing contributes to both objectives.