Governor of the central bank, Dr. Ernest Addison, has implored banks to make loans more accessible and affordable to the private sector – so that the good effects from banking reforms can be felt in the economy.
His call comes after a Bank of Ghana survey – the results of which were published as part of the Banking Sector Report (June 2019) – showed a decline in the overall demand for enterprise credit between April and June 2019, despite the industry recording an after-tax profit of GH¢1.67billion that, represented a year-on-year growth of 36.3%. Besides profitability, deposits increased by 22.3 percent to GH¢75.5billion as at end June 2019, with both domestic and foreign currency deposits outperforming the previous year’s performance.
According to Dr. Addison, the banking sector’s performance shows it is benefitting from the reforms as it has become more resilient; hence, support must be given to the private sector in the form of affordable loans so that the economy will feel the impact of those reforms.
“I have every reason to feel confident about gains and achievements made so far in the financial sector. The present financial sector is currently healthier and better able to withstand external shocks compared to the financial sector at the beginning of 2017. It is better capitalised, liquid, profitable, and more efficient; and has adequate capital buffers to enable it manage any adverse external developments.
“Going forward, we expect access to credit to be on predictable and cost-effective terms as part of benefits from the reforms; and we have met with every bank and discussed ways in which these results can be realised by end of the year. Such a successful outcome will depend on macroeconomic policies and reforms in the financial sector. But it will also depend on the private sector’s own initiative, resourcefulness, and capacity to take advantage of opportunities which have been created by the reforms,” he said at the Ghana Association of Bankers annual working luncheon in Accra.
Responding to the call, Managing Director of Stanbic Bank, Alhassan Andani, said banks will remain committed to helping the private sector. However, caution should be taken that this doesn’t run banks into the age-old problem of high Non-Performing Loans (NPLs).
“After all that the taxpayer has gone through in shaping up the sector, it is only fair that we make credit more accessible and affordable. But as to the contributing circumstances that created the NPLs, even as we increase credit to the private sector, let us ensure that at least we can minimise risks which can make these loans slip quickly back to NPLs.
“The Governor met all the Managing Directors to ensure that we pay more attention to extending credit to the private sector, and he has our commitment to do so,” he said during a media interaction at the same event.