The Bank of Ghana (BoG) has been called upon to make the banking laws of the nation favourable to the special needs of Small and Medium scale Enterprises (SMEs). Mawuli Hedo, an Executive Director of First Banc, made the suggestion while sharing his view with the B&FT on what to do in order to lower lending rates encountered by businesses in the country. He observed that the present structure, whereby both SMEs and large scale businesses are made to undergo same appraisal procedures before possibly served credit, lacks the room for treating SMEs as clients with special needs. "At the moment, the banking laws are such that both the SMEs and large scale businesses must meet the same criteria if they happen to be in need of a bank facility. "But ask yourself how can an SME compete with a large scale business like the type of Unilever, for the same bank facility? The SMEs cannot survive under that kind of banking law. The market needs a different banking law on SMEs. Bank of Ghana must draw up one if the interests of SMEs are considered that paramount for the nation's growth," he said. Touching on the role of SMEs, Mr. Hedo observed that in the absence of any law to make things easier for them, SMEs must organize their operations and activities and uphold tenets of credit worthiness to brighten chances of accessing credit while enjoying lower interest rates on facilities accessed. "It is possible for financial institutions to reduce rates on banking facilities. The reduction of rates is actually not a problem. It is the inability of SMEs to access the banking facilities on ground; and by that I mean majority of the SMEs we have in the country do not maintain proper documentation on their activities, say for instance simple records on incomes and expenditures. "In the worst scenario, you many times come across SMEs that do not have the required skills for their businesses. Sometimes I believe that when they convert from one-man business to partnerships, it can help them,” Mr. Hedo pointed out. The latest annual percentage rates published by the BoG showed that banks charge businesses between 25 and 48 percent. In the case of the non-bank financial institutions that are most dedicated to serving the SME market, annual rates start from at least 80 percent. In a separate interview, Micheal Atuahene, a Project Officer at UT Financial Services added that in addition to proper management of their enterprises, SMEs should endeavour to engage in low risk businesses activities. "Profits made by SMEs from their operations go a long way in determining the kind of rates placed on credit facilities made available to them. "Profits are worth the loans. A business that has the ability to make high profits periodically is a low risk business. It is the low risk enterprises that attract low rates on banking facilities," he explained. Meanwhile, a top official at the Standard Chattered Bank who pleaded for anonymity lamented the failure of entrepreneurs to facilitate their loans. According to her, most entrepreneurs prefer to reinvest their profits in their businesses, rather than finance their loans. This she said does not encourage banks to offer credit facilities to SMEs. "The banks will not continue to lend money to small businesses as long as there are lots of other businesses ready out there for those same credit facilities. Most prefer to reinvest their profits, hence leaving their interest rates to heap up. After a while, they realize they have invested wrongly, and are unable to finance their loans," she lamented. Source: B&FT