I am writing to share my opinion on the issue of high lending rates at our banks. Whereas the economy has been said to be booming, an expensive credit regime in the country is holding back the momentum, hitting both big industries and small ventures hard. The Central Bank’s inability to enforce a cheaper lending regime has left many investors frustrated. I understand that lending rate is the bank rate that usually meets the short- and medium-term financing needs of the private sector. This rate is normally differentiated according to creditworthiness of borrowers and objectives of financing. The terms and conditions attached to these rates differ by country, however, limiting their comparability. However, the country’s 2013 lending rate is said to have stood at 28 percent making it one of the highest in sub-Saharan Africa. This is not entirely favourable to our business environment. We have to understand that one of the expected benefits of financial liberalisation and deepening of the financial sector is the narrowing of the interest rate spreads, i.e. the difference between the interest rate charged to borrowers and the rate paid to depositors. This is predicated on the understanding that liberalisation enhances competition and efficiency in the financial sector. Thus, wide deposit-lending interest rate margin could be indicative of banking sector inefficiency or a reflection of the level of financial development. Basically, embedded in the spread is the information to do with the efficiency of the financial intermediation, profitability and monetary policy impact, among other factors. Meanwhile, the role of financial sector in facilitating economic growth and development both in The Gambia and elsewhere is well acknowledged. The banking sector plays a dominant role in the financial sector, particularly with respect to mobilisation of savings and provision of credit. An analysis of the high interest rate spreads in the sector is not only useful in its own right, but is also central to the understanding of the financial intermediation process and the macroeconomic environment in which the banks operate. That notwithstanding, there has been little empirical research on this issue, particularly with respect to the investigation of industry-level or bank-level determinants of interest rate spreads. Simply, it is slowing the growth of our economy. Any research would also point to the fact that it is harmful to the growth of our economy. Investments need the support of banks and there has to be regulations that will monitor any activity that discourages investment. Let’s tame high lending rates.
Upholding democratic tenets
I want to use your medium to say that man has an insatiable appetite for power. Power is authority, prerogative, jurisdiction, force and domination. However, the dynamics of power in contemporary times entail the entrenchment of democracy, liberty, rule of law, constitutionality, due process and electoral laws. Power is not the exclusive preserve of a cabal or selected few. It is the democratic right of each and every human being. But when we talk about democracy, it is when every citizen has certain basic rights that the state cannot take away from them. These rights are internationally recognised and guaranteed. Everyone has the right to have their own beliefs, including their religious beliefs, and to say and write what they think. Everyone has the right to seek different sources of information and ideas. Everyone has the right to associate with other people, and to form and join organisations of their own choice, including trade unions. However, citizens have an obligation to exercise these rights peacefully, with respect for the law and for the rights of others. We have to remember that as humans, with every right comes with responsibilities. We must not shy away from that fact. Inasmuch as we want to uphold these democratic tenets, we must not renege on our responsibilities as citizens of this great planet – Earth!