News Column

Ghana's Banks' Assets Surge but Businesses Can't Access Credits

July 14, 2014

Masahudu Kunateh

Total assets of banks operating in Ghana have risen significantly at the time that the Ghanaian government is lacing its boots to go for International Monetary Fund's (IMF's) bailout.

From January to May 2014, the banking sector remains sound and continues to expand, evidenced by strong asset growth, according to data from the Bank of Ghana (BoG). Total assets grew by 44.4 percent year-on-year to GH¢42.9 billion at end-May 2014, compared with GH¢32.1 billion a year ago. The asset growth was on the back of advances, which accounted for 45.1 percent and was funded largely by deposits which went up by 32.5 percent year-on-year, the central bank disclosed. The Governor of the BoG, Dr Henry Kofi Wampah noted that key monetary aggregates grew at a rapid pace driven largely by Net Domestic Assets of the banking sector. Broad money (M2+) grew by 30.8 percent year-on-year to end May 2014 at GH¢22.8 billion, compared with 17.1 percent growth in the same period last year, he added.

Similarly, annual growth in Reserve money was 38.2 percent in May 2014, compared with 24.5 percent growth in May 2013. Also during the period under review, Non-Performing Loans (NPLs) ratio declined to 12.8 percent in May 2014 compared to 13.4 percent in May 2013. However, NPLs (less loss provisioning) ratio remained broadly unchanged at 5.3 percent. The Capital Adequacy Ratio of banks declined to 16.7 percent in May 2014, from 18.1 percent in May 2013 on account of increased credit delivery but remained above the regulatory benchmark of 10 percent". However, the bank's credit conditions survey conducted in June 2014 suggested the tightening of credit stance for most loan types including consumer credit, small and medium enterprises (SMEs), large enterprises and short-term loans. Interest rates on the money market generally moved upwards in tandem with the BoG's tight monetary policy stance.

Economic activity remained fairly strong in the first quarter of 2014 despite adverse supply side shocks. The Bank's Real Composite Index of Economic Activity (RCIEA) rose by 9.7 percent on a year-on-year basis in the first quarter, compared with 0.5 percent growth in the same period of 2013. The major growth drivers were Domestic VAT and Deposit Money Banks' (DMBs) credit to the private sector.

The Bank's CIEA trends were consistent with the recent release by the Ghana Statistical Service which estimated real GDP growth at 6.7 percent year-on-year in the first quarter of 2014 compared with 9 percent same period last year. This was driven by the Agricultural sector with the highest year-on-year growth of 12.7 percent and Services with 4.6 percent. Industry however contracted by 1.1 percent dragged down by negative growth in the manufacturing sub-sector.

The Bank's surveys conducted in March and May 2014 showed further softening of Business and Consumer Confidence alongside heightened inflation expectations. The Business Confidence Index declined to 82.8 in March 2014 from 99.0 in December 2013 as businesses anticipated slowdown in industry growth, sales, revenues and capital outlays due to exchange rate depreciation and high cost of operations. Similarly, the Consumer Confidence Index fell to 76.1 in May 2014 from 81.9 in February explained by softened consumer sentiments on employment prospects, household financial conditions and general economic outlook.

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Source: AllAfrica

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