A new Bank of Ghana report has revealed significant reduction in loans granted by commercial banks to businesses and individuals.
The Bank of Ghana’s Financial Stability Report attributes the situation to difficult economic environment which has affected credit extension.
Standard Chartered Bank recently confirmed the situation after stating it has cut down on aggressive loans.
But a careful look at the report also indicates that this challenge might not be ending anytime soon because of fears the current economic conditions would persist longer.
Other reasons given the central bank for the reduction in loans include balance sheet constraints and the recent sharp increases in the policy rate.
The report indicates that significant drop in credit delivery was recorded between October to December last year.
Some analysts say the challenge might not be ending soon due to the fundamental triggers for the development – tightening of monetary policy, high cost of credit, and challenging economic environment.
They explain Ghana’s programme with the IMF will result in further policy rate hikes to help control inflation as well the difficult economic environment that shows no sign of a let-up.
Analysts have described the development as a major source of worry because it captures the situation in the entire banking industry rather than just one bank, noting it could result in commercial banks lending more to government through T-bills instead lending to businesses and individuals.
But speaking on Business Trends on Joy FM, Director of HFC, Robert Le-Hunte told host George Wiafe, that there might still a way out for businesses and individuals wanting to turn to the banks credit.
He said a good proposal from businesses especially could convince lenders.
“The fact that we have a non-performing loan portfolio means that in the past we have given out [loans]”, explaining what banks have done is really to tighten their assessment of borrowers.
Speaking on same program, Managing Director of Standard Chartered Bank, Kweku Bedu said businesses who present evidence that they are on top of “managing their franchise” would convince lenders.
Source: Myjoyonline