The Chief Executive Officer of the Association of Ghana Industries, Seth Twum Akwaboah, says the current domestic debt exchange should be a wakeup call for banks and other financial institutions in the country to have a more diversified lending portfolio.

According to him, their overreliance on supposedly risk free government securities is what has left them exposed and vulnerable to the debt treatment.

Speaking on JoyNews’ PM Express Business Edition, he said the government should not have created the conditions that pushed financial institutions into investing more into government securities rather than lending to industries.

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“Well to some extent yes, but I think that normally you shouldn’t also create conditions that encourage that kind of arrangement. Banks should have portfolios of lending. One of it could be government bonds and all that, but if you make it overly attractive and the assumption that we all know, until recently everybody thought that when you invest in government bonds and government securities that’s the most risk freest first instrument you could have so that’s what everybody was doing.

“And naturally so the banks are also business people, I’m not justifying it because we also are not happy that they’re not lending to industries and factories and we always complain about it if you look at their portfolio of lending, they’re not lending that much so we’re concerned about it.

“So if you create conditions, they’re rational thinkers, natural companies that want to maximize profit so naturally they’ll go along those lines because if it is less risky and the returns are good, then the natural thing is to lend more of it,” he said.

He is hopeful that following the bitter pill these financial institutions have had to swallow as a result of the debt treatment; they will begin to lend more to industries rather than government.

“But of course under the circumstance, I’m sure they’re also learning their lesson that subsequently, don’t lend too much to government after all it’s not that safe either so lend to businesses. It could be medium to long term, you may not get the returns immediately but in the long run it will help a great deal,” he said.