Latest figures from the Bank of Ghana’s financial stability report reveals indigenous companies contributed more than 70 percent to the non–performing loans (NPLs) of the banking industry in 2015.
According to the report credit to the private sector contributed 97.4 percent of the total banking sector’s non-performing loans as at September 2015 compared with 93.1 percent in September 2014.
Even though private enterprises received only 71 percent of the private sector credit, they accounted for 88.4 percent of NPLs in the sector as at September 2015 compared with 70.5 percent of credit received and 83.8 percent of NPLs respectively in the same period in 12 2014.
According to the International Monetary Fund (IMF), a loan is non-performing if it is 90 days overdue.
A loan can also be classified as non-performing if it is less than 90 days overdue but repayments are no longer anticipated.
Repayment of principal and interest on loans create a stream of cash flows for banks and they derive their make profits from interest repayments from loans.
Industry watchers fear the latest development will reduces banks’ profits and their ability to further lend to borrowers in 2016.
According to the BoG’s report non–performing loans of the banking industry went up to 13.5 percent in September 2015 as against 12.1 percent in September 2014.
Credit to the private sector contributed 97.4 percent of the total banking sector’s non-performing loans as at September 2015 compared with 93.1 percent in September 2014.
Even though private enterprises received only 71 percent of the private sector credit, they accounted for 88.4 percent of NPLs in the sector as at September 2015 compared with 70.5 percent of credit received and 83.8 percent of NPLs respectively in the same period in 12 2014.
According to the central bank the highly disproportionate level of NPLs associated with the private enterprises was driven mainly by indigenous enterprises, which received 60.9 percent of credit to private enterprises but accounted for 79.1 percent of NPLs as at September 2015.
However, while foreign enterprises’ share of private sector credit declined, their contribution to private sector NPLs increased marginally over the period under review.
Households’ share of private sector credit and contribution to NPLs increased marginally over the review period Commerce and finance sector according to the central bank continued to account for the largest amount of the banking sector NPLs followed by services, and manufacturing.
The three sectors accounted for 66.1 percent of NPLs in September 2015 compared with 64.2 percent in September 2014.
Electricity, Gas and Water sector accounted for the lowest amount of the industry’s NPLs Meanwhile the proportion of banks’ NPLs attributable to the public sector improved from 6.9 percent in September 2014 to 2.6 percent in September 2015.
Source: citifmonline