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GHANA: COURT SHOULD LEAVE SALE OF COLLATERAL TO BANKS March 6, 2006
Kizza Harajah
(SomaliNet) Banks in Ghana are pushing for a new law that could enable them to sell collateral in case of failure to pay back loans without court involvement.
There is alot of default in loan payment in Ghana. This is as stated by Frank Adu, the Managing Director of CAL Bank . However, the process of recovering the money is complicated further by the courts of law. “If you default a loan repayment and we take you to court, the smartest move you can make is not to appear in court. The bank then takes judgment against you, and according to the law, interest will drop to 4% simple interest. So basically, the interest rate of 21% and 22% drops to 4%. You then appeal, which may take about five years for it to be finally determined, by which time the money had been used for other things.That is what is killing the banks,†Adu said.
According to him, Ghana's government should deal with the situation first if banks are to help in the development of Small and Medium scale Enterprises (SMEs).
The law has been applied in India with success.