Businessman Seidu Agongo, the founder of Heritage Bank, has revealed that his motivation for establishing the bank was to address the high interest rates in Ghana, which he deemed excessive.
In a recent interview with Metro TV, Mr. Agongo expressed frustration with the interest rates charged by local banks, particularly the 35% annual rate, and the additional 5% per month charged by some institutions.
“I don’t believe in the interest rates that the banks charge in Ghana. It’s too much. How can you go into a financial institution, wanting to take a loan, and they charge you 35% per annum? Some even charge 5% per month,” he complained.
He emphasized that high interest rates are detrimental to business growth, as they hinder businesses from reinvesting in themselves and expanding. “No matter the reasons, to me it doesn’t make business sense because business is about continuity. Once the banks take so much, businesses become dependent on the banks, limiting their ability to grow,” Mr. Agongo said.
His goal in setting up Heritage Bank was to offer a competitive interest rate of 20%, in contrast to the prevailing high rates. He proposed that if one indigenous bank were to offer lower rates, it could force other banks to follow suit, leading to a more favorable environment for businesses.
Mr. Agongo further criticized the conditions attached to loans in Ghana, such as medical tests, and pointed out the disparity in the treatment of foreign and local companies. “Foreign companies get an open cheque, while local businesses face stringent conditions, sometimes unique to Ghanaians,” he remarked.
He attributed the banks’ ability to maintain high interest rates to the lack of alternatives for Ghanaians, particularly the failure of the local stock market. “Our stock market has failed us. Apart from South Africa, the stock markets in the region are weak, and even when they exist, nothing happens. This forces businesses to rely on banks with exorbitant interest rates,” he said.
Agongo expressed his hope that Heritage Bank would eventually become a major player in the sub-region within the next decade, filling the gaps in the banking sector. “Heritage Bank was coming to fill these gaps. In 10 years, we aim to be a dominant force in the sub-region,” he stated.
He also advised other banks to support young entrepreneurs by offering mentorship, guidance, and investment, even if they are unable to provide loans.
Heritage Bank was among the nine local banks that were collapsed by the Bank of Ghana under the Akufo-Addo administration.