Credit to the private sector by commercial banks registered an upward shift in the first two quarters of 2017, as compared to the same period in 2016.
According to Dr Ernest Addison, Governor of the Bank of Ghana (BoG), on a year-on-year basis, bank credit to the private sector and public institutions increased by GH¢5.1 billion, representing 16.4 percent year-on-year growth compared with GH¢2.5 billion (11.3 percent year-on-year growth) for the same period in 2016.
Of the total credit flow, Dr. Addison said the private sector accounted for 86.5 percent, adding that “in real terms, credit to the private sector rose by 3.2 percent in May 2017, as against 7.4 percent contraction over the same period last year.”
He indicated that “the credit conditions survey conducted by the bank in June 2017 showed some tightening of credit conditions for enterprises and households as banks begin to clean their books and reclassify their loan portfolios following the industry-wide comprehensive asset quality review exercise that ended in December 2016.”
Overall, the Governor said, “The banking sector remains sound, well capitalized and liquid.”
However, he said, the quality of lending weakened over the last few years, with non-performing loans reaching 21.7 percent in May 2017.
According to him, following the Asset Quality Review (AQR), BoG has been implementing a roadmap for recapitalization, which required the few banks which did not meet the minimum capital adequacy ratio to submit capital restoration plans.
“The implementation of the plan is on course. Most of these banks have met the minimum requirement and a few are on course to doing so within the stipulated timeframe,” he added.
Most people, who went for loans last year from commercial banks operating in the country failed to repay their loans, hence the rise in the non-performing loans ratio of banks.
It is for this reason that some indigenous banks have upped their interest rates to deter loan applicants from reaching them.
Source: Daily Guide
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