The Alliance for Development and Industrialisation, (ADI) has taken a swipe at the Bank of Ghana, demanding that the governor shows clearly how he is going to mandate the banks to support the private sector – and not to create a safe haven for the banks.
The Bank of Ghana spent close to GH¢18billion of taxpayers’ money to clean up the banking sector and also provide liquidity support for some banks.
The ADI queried: after this GH¢18billion clean-up exercise by the Bank of Ghana, to what extent has this impacted on the economy? “Banks are not ready to support the private sector, so why should government use taxpayers’ money to support the banking industry, especially banks that were technically insolvent due to bad corporate governance and mismanagement?” the statement asked.
“We want the Bank of Ghana Governor, Dr. Ernest Addison, to unveil to us what percent of banks’ capital should go to support the private sector. In Nigeria, for instance, the central bank of Nigeria has come out with a caveat that 50 percent of banks capital should be lent to the private sector. We want the same policy to be replicated here,” according to Francis Mensah, the Convener of ADI.
The decision by the central bank of Nigeria was necessitated by how banks repatriate huge profits from the country to their parent companies without the much needed support to the private sector.
“You cannot keep taxing the private sector while you are not committed to their agenda. You don’t set rules for the rules to favour one party. We must replicate what the central bank of Nigeria is doing to grow our private sector,” the statement said.
This would feed into the continental free trade agenda, since most of the companies would become more competitive on the global market.
The banking sector’s profitability growth soared in the first months of 2019, but it has decided to tighten its credit stance to the private sector.
The latest banking report from the statutory regulator, the Bank of Ghana, has revealed that profitability of the banking industry improved during the first four months of 2019 compared with the same period last year.
The industry recorded an after-tax profit of GH¢1.1billion, representing a year-on-year growth of 38.9 percent compared with 5.8 percent growth for the same period last year. The higher growth in net profit was underpinned by higher growth of net interest income during the review period.
Surprisingly, growth in gross loans and advances slowed from 6.8 percent in April 2018 to 6.1 percent in April 2019. In nominal terms, growth in the stock of credit to the private sector comprising private enterprises and households slowed by 3.5 percent to GH¢34billion in April 2019 compared to 5.5 percent annual growth in April 2018.
In real terms, private sector credit contracted by 5.4 percent in April 2019 compared with a contraction of 3.7 percent a year ago. Credit to households amounted to GH¢8.4billion in April 2019 compared with GH¢7.2billion in the same period last year, indicating a yearly growth of 16.4 percent. Real growth in credit to households accordingly slowed to 6.3 percent in April 2019, compared with 28.6 percent in April 2018.
Banks’ profitability growth has continued to increase, which means banks are making more money in the country but have decided to squeeze the private sector in terms of credit.