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Ratio of loans to GDP too low for growth, says Wigwe

Ratio of loans to GDP too low for growth, says Wigwe
By Chiwoyu Sinyangwe and Joan Chirwa
Wednesday May 21, 2008 [04:00]

ACCESS Bank Zambia Limited has observed that the ratio of loans to gross domestic product (GDP) in most African countries is too low to support the continent's growth in entrepreneurship. During the dinner hosted on Monday evening to celebrate the granting of a banking licence by Bank of Zambia (BoZ), Access Bank Zambia deputy managing director Herbert Wigwe also said the bank would strive to ensure that it achieved total market dominance in the domestic market.

"Except South Africa, in all African countries the ratio of loans to the GDP is anything between 20 to 39 per cent. This is a big shame," Wigwe said. "And with this situation, you find that you can't create local entrepreneurs in the country because people are not willing to lend them any money."

He also deplored the practice of some multinational financial institutions, which he said tended to lend to governments through government securities at the expense of local entrepreneurs.

"Because of those practices you have, the banks just banking all their money and putting them into treasury bills...now if you have a lot of international institutions that don't have your interests at heart and are extractive in nature, what you tend to find is that kind of phenomenon. It's one of the things we have to move away from if we have to ensure that we have several more entrepreneurs growing, people who are supporting the real sector and therefore leading to significant economic growth of the country."

Wigwe also observed that the banking industry on the continent was too shallow and that it did not have enough capital to support growth in real sector growth.

"So, the level of financial inclusions is so thin that the size of the informal economy is much larger than the formal economy and the primary reason is that you have banks that don't have enough capital and therefore their capacity to support growth of the real sector is so limited," said Wigwe.

Labels: ACCESS BANK, BOZ, GDP, LOANS

posted by MrK @ 3:44 AM