BoG Governor worried about rising NPLs among Club 100 members

Inflation, fiscal, debt pressures keep policy rate static again
Photo: Dr. Ernest Addison, Governor Bank of Ghana

The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, is not happy with the level of non-performing loans being recorded by commercial banks.

According to him, data available to the BoG show that “a large chunk of non-performing loans is due to firms that are supposedly doing well, with some of them making the Ghana Investment Promotion Centre’s (GIPC) Club 100 list”.

Briefing members of the Ghana Chamber of Commerce and Industry (GNCCI) on measures being put in place to ensure private sector credit picks up, Dr. Addison said deliberate policies are being pursued to ensure there is enough liquidity to spur business activities – but the attitude of not servicing loans needs to be addressed.

“As policymakers we have focussed on policies that will improve access to finance for businesses, but businesses will have to do their part to support policy efforts in the financial sector. The difficulties faced by banks in lending to the private sector due to high non-performing loans must be resolved with a change in borrower behaviour and culture,” he said.

He added that banks also face difficulties due to high risk of Small and Medium Enterprises with insufficient capital, lack of accounting records, and inadequate financial statements or business plans, which makes it difficult to assess creditworthiness. There is a need to strengthen corporate governance structures of businesses, whether small or large, because they can determine the success or failure of a business in the long run.

“This is one of the key lessons from the financial sector reforms: namely, the weak corporate governance structures significantly contributed to failure of the banks and Special Depost-Taking Institutions (SDIs),” Dr. Addison said.

Dr. Addison however expressed optimism that private sector credit will pick up, as the signs of an economic rebound are positive after the ravages caused by the COVID-19 pandemic.

According to him, the policies introduced as a result of the pandemic to control its effect on business have begun yielding positive returns.

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