By Fred Yaw Sarpong
The National Bond Market Committee (NBMC II) is advocating for an independent Credit Rating Agency (CRA) in Ghana to help rate companies and issuers in the country.
According to the committee there is a lack of independent Credit Ratings in Ghana, because there are no credit rating agencies and therefore buyers of bonds do not have an independent assessment of default risk.
The Chairman of the Committee, Michael N.A, Cobblah disclosed this in an interview. This was after a day workshop on bonds was organized by Ministry of Finance and the committee to some financial journalists.
He stated that the challenge of setting up a credit rating agency in Ghana arises from the fact that credit rating agencies would only be set up in a country in which there are enough issues to rate so that they can operate profitably.
‘As a country, we need rating agencies to rate two things. Rating issues, that is instrument that comes to the market and rating of companies. And all that rating agency does is that it gives some assurance of quality of credit that comes to the market,’ said Cobblah.
‘If you are rating then you are trying to access the credit quality of the company or credit quality of issues that is coming to the market and it give investors all over the world assurance,’ he added.
He gave an example that, if you have your company or issue rated, you open yourself up to all kind of investors. ‘There are various kinds of investment in the world, which will only invest in a paper that is rated,’ Cobblah explained.
The Chairman of NBMC II further explained that ‘as a matter of facts, if you issue a bond and is an unrated bond, there is a limited pull of fund that you can attract but if the bonds are rated you can get a larger number of the instrument, and because you and I cannot always go and open the company’s books ourselves, an independent body comes in and then access the credit quality issue that is coming to the market. That is why we need the credit rating agency.’
The NBMC II is tasked to recommend policy measures and reforms to address the remaining weakness and deficiencies in the legal and regulatory framework, market infrastructure and other important mechanisms that will help to target the mobilization of domestic resources through the promotion of attractive policies to grow and develop the corporate bond market.
The NBMC II is also expected to identify the constraints to the development of a corporate bond market among others.
It’s also to review and monitor the performance of the government bond market and recommends legal and regulation, issuance and market development and infrastructures and proposes changes to improve its effectiveness as an anchor for the corporate bond market.
Also, the committee it to identify the constraints to the development of a corporate bond market; and assist the private sector to participate in the bond market by proposing appropriate financial or technical mechanisms.