May 23, 2008, 4:26 AM
The two per cent reduction in the Cash Reserve Requirement (CRR) for commercial banks announced recently by the Central Bank of The Gambia (CBG) is like good news from a distant land, for it has brought some cold water to the weary souls of entrepreneurs and businesses in the country, who could not stand the hit of the ever-increasing lending rates charged by commercial banks for loans and advances given to customers.
The 2 % reduction in CRR means that commercial banks in the country can now have more ‘disposable’ cash in their possession than before, because the money required from them to be lodged at the Central Bank as reserve at any point in time has been reduced.
According to a press release from the banks, in lieu of the reduction in CRR, commercial banks, such as Standard Chartered Bank and Trust Bank Limited have reduced their prime lending rates by about 2 per cent.
This reduction is highly welcomed by entrepreneurs and businesses in the country, as it means business people and customers would not be too hesitant to take loans and advances from banks to develop and expand their businesses.
The high lending rate has been causing serious harm to the growth and expansion of businesses, especially small scale and medium enterprises (SMEs) whose turnover, in most cases, does not measure up to withstand the increasing rate established by the banks.
In other words, these SMEs are left to collapse gradually for lack of financial resources to keep them afloat in business.
Apart from causing stunted business growth, a high lending rate has multiplier effects that have a negative impact on business expansion, job creation and poverty reduction.
So the move by the Central Bank to reduce CRR is highly applauded as it is in place, followed by the reduction in the prime lending rate that will be effected by the commercial banks, come June this year.
We would, however, like the Central Bank to effect more reduction, as this will help the growth of businesses in the country and increase job creation, with other sundry benefits to the national economy and people’s livelihood.
Bravo Central Bank of The