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Businesses can Now Borrow Short-Term Funds – Ghana Stock Exchange

Abena Amoah expressed optimism that the CP market would offer a viable solution to the business community's short-term financial needs, urging stakeholders to collaborate for its success and the nation's prosperity.

Businesses in need of quick funding for operational necessities can now turn to the Ghana Stock Exchange (GSE) and borrow funds on its Commercial Paper (CP) market. 

Launched on Friday, May 10, this market offers companies an expedient avenue to secure short-term funds efficiently, while also presenting fresh investment opportunities for investors. It’s particularly beneficial for small and medium enterprises (SMEs) and emerging businesses grappling with access to financing.

Each Commercial Paper issue will have a minimum size of GH¢1 million, with minimum denominations of GH¢10,000, and durations ranging from 15 to 270 days. The CP market operates under regulations, requiring companies seeking to borrow through it to undergo formal application processes, including approval from the Securities and Exchange Commission.

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Once approved, CPs will be traded on all Ghana Fixed Income Market-approved platforms, with credit rating agencies assessing the creditworthiness of borrowing institutions and assigning appropriate ratings to guide investors.

At the launch event, Abena Amoah, Managing Director of the GSE, traced the CP market’s origins to the merger of the Exchange and the Bank of Ghana’s depository businesses in 2014, leading to the establishment of the Central Securities Depository Ghana and the eventual establishment of the Ghana Fixed Income Market in 2015.

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She expressed optimism that the CP market would offer a viable solution to the business community’s short-term financial needs, urging stakeholders to collaborate for its success and the nation’s prosperity.

“Let’s work together to ensure its success and sustainability. By doing so, we are laying the groundwork for a brighter, more prosperous future for Ghana and its people”, she stated.

The Governor of the Bank of Ghana, Dr. Ernest Addison in a speech read on his behalf, highlighted the market’s importance in diversifying short-term lending and borrowing opportunities, particularly after the adverse effects of the Domestic Debt Exchange on investor confidence.

He commended the GSE for introducing the CP Market, noting its timely creation of new investment avenues for institutional investors like pension funds, insurance companies, and asset management firms.

“Indeed, the investment climate for both retail and institutional investors became limited, the reason why I would like to commend the Ghana Stock Exchange for introducing the Commercial Paper Market to support the development of Ghana’s capital market”, he stated.

Dr. Addison emphasized the need for robust regulation to maintain market integrity, urging regulators to strike a balance between fostering innovation and upholding market conduct rules.

“Upholding these rules is imperative for fostering investor confidence and facilitating the anticipated growth of the commercial paper market” the Governor explained.

A well-developed and regulated CP market offers numerous benefits for both borrowers and investors. For borrowers, it provides lower interest rates compared to other short-term financing options, and they can be issued quickly, providing a fast and convenient source of funds for companies in need of short-term funds.

Also, successfully issuing a commercial paper can enhance a company’s credit profile and signal to investors that the company is financially stable and has strong cash flow.

Investors, on the other hand, gain access to short-term investment opportunities, an avenue that is not available in the fixed-income market here in Ghana. Additionally, since the CP will be credit-rated, investors can choose commercial papers based on their risk tolerance and desired yield.

Papers with higher credit ratings tend to offer lower yields but are considered safer investments, while lower-rated papers may offer higher yields but carry higher risk.

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