Low rate of loan recovery has been identified as one of Ghana's financial sector banes, limiting credit access and business growth. The 'Making Finance Work for Africa' conference held in Accra last week made this observation and noted that it is one of the reasons why cost of credit in the country is high, as it pertains in the entire region. It was said that for Ghana and its African peers to grow, the small and medium-scale enterprises, which constitute on average 60 percent of African economies, the financial sectors on the region need to work acutely at developing the credit cycle, making it efficient and effective. Last year's banking survey report by PricewaterhouseCoopers said that the proportion of cumulative loan loss reserve to gross loans for the industry improved from 15.7 percent in 2003 to 5.29 percent last year. In fairness to the fact that actual systemic risk is considered really high by the banks, the report commented: "It is likely that some banks may be reluctant, or presumably be too optimistic, to recognise the full scale of potential default risk carried within their loan book." The Minister of Finance and Economic Planning, Kwadwo Baah-Wiredu, who also shared a similar view explained: "Most business people that do petty savings, what we call 'susu' in Ghana, actually make these savings in order to use the proceeds for bigger projects sometime in the future. "Ideally, however, these business people should go to the bank for the financial assistance they need now and pay back later; but how would this happen if both the banks and the borrowers cannot be certain on repayment?" He expressed government's commitment to tackling the bane in order to free the channels of credit facility for business growth and prosperity. Average lending rate quotation currently stands at 35 percent per annum by the banks and 120 percent per annum by the non-bank "financial institutions. Among other factors identified as limiting financial access in Africa were collateral requirements for loans and administrative charges. Interest rate margins on the continent have reached eight percent, compared to the world average of 4. 8 percent. Louise Kasekende, a Chief Economist at the African Development Bank, confirmed that availability of credit for the private sector is improving but - at 14 percent of gross domestic product - is insufficient to drive growth and private sector development. Joseph Carasso, the CEO of Citi Group Ghana, said investors and donors must see the shortcomings in the African financial systems as opportunities. "Gradual macroeconomic stability, financial reforms and technological innovations taking place in the region create substantial opportunities for expanding the availability of finance for productive investment and enhancing outreach of financial systems," he underscored. He pointed out that some African countries' successful floatation of bonds on the international capital market is a good sign of reforming financial sectors and economic management systems. He, however, expressed the need for stakeholders in the region to encourage medium-scale enterprises to take advantage of the stock market in raising capital through stocks and bonds, since daunting credit requirements like demand for collaterals do not exist on the exchange. Credit: B&FT