The Ghana Association of Bankers says it is confident banks in the country will lend more to the private sector once the Development Bank Ghana begins operations.
According to the Central Bank, while credit to the private sector has seen a marginal pickup, the trends remain below expectations largely on account of pandemic-related risk aversion.
The Chief Executive Officer of the Ghana Bankers’ Association, John Awuah, blamed the situation on the banks’ lack of access to long term funding to be able to lend to the private sector.
He however, believed partnering the Development Bank Ghana when it starts operations would help put an end to the problem.
“Cost of long-term funding in the country is very high because people are looking at what the available benchmark is, and we’ll be working closely with our partners to ensure that we have access to the right mechanisms to be able to extend long-term credit. We’ve also seen that partnering strongly with the proposed Development Bank can also be a good avenue to having access to long term funding to enable us intervene properly in the market,” he said.
Many have blamed the continued lending by some banks to government as well as the high treasury bill rates, for the low level of credit advanced by financial institutions to the private sector.
According to data from a report assessing Ghana’s competitiveness and available opportunities for the country under the African Continental Free Trade Area (AfCFTA) in April this year, domestic credit to the private sector as a share of GDP in Ghana is amongst the three lowest frontier economies in Africa, with only Nigeria and Tanzania ranking behind Ghana.
A recent report from the Bank of Ghana revealed that the worrying trend of growing non-performing loans in the assets of commercial banks has made banks maintain a cautious stance in lending to the private sector.
This has led to the annual nominal growth in private sector credit slowing to 9.5 per cent in August 2021 compared with 14.3 per cent in the corresponding period of 2020.
