Where your writer Stephen Gyasi Jnr’s analysis of the interest rates charged by Ghanaian banks falls down (‘Interest Rates “killing” economy’ – African Business, May 2010 issue) is in his failure to recognise the difficulty that the commercial banks, in the absence of accurate credit-rating agencies, have in assessing risk when considering a loan application.

This means they have to anticipate a large percentage of non-performing loans and charge high interest rates accordingly. Even the possession of land title deeds or ownership of a building cannot be taken at face value by banks seeking collateral for loans, given Ghana’s lack of up-to-date registries.

The answer is for Ghana, and many other African countries, to embark on an exercise to formalise the ownership of these types of assets. Policy makers would do well to read the Peruvian economist Hernando de Soto who has written extensively on the importance of the informal economy and of business and property rights in driving development.