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Banks fleece customers…cut down on loans


By Elorm Desewu

Commercial banks operating in the country have slashed down on loans and advances to the private sector and customers for the first two months of 2021.

The stock of gross loans and advances excluding the loans under receivership increased to GH¢47.6 billion at end-February 2021, representing a 3.6 percent annual growth, lower than the 26.0 percent growth in February 2020. The slower growth rate in total credit in February 2021 reflected declines in the annual growth rates of its components.

Public sector credit contracted by 23.0 percent, in sharp contrast to the growth of 66.8 percent recorded in February 2020. The share of public sector credit in total credit accordingly declined from 12.3 percent to 9.1 percent over the review period.

Private sector credit of GH¢43.2 billion remained the larger share of total credit, but its growth declined from 21.6 percent in February 2020 to 7.4 percent in February 2021.

The sectoral breakdown of loans indicated that the services sector continued to hold the highest share of credit, followed by the commerce and finance sector and the manufacturing sector with respective shares of 27.5 percent, 24.4 percent, and 10.7 percent at end-February 2021.

These three sectors accounted for 62.5 percent of total credit and the remaining 37.5 percent was distributed across other economic sectors. The mining and quarrying sector remained the lowest recipient of industry credit with a share of 2.4 percent at end-February 2021.

The industry’s exposure to credit risk has somewhat heightened since the outbreak of the pandemic in March 2020, and its resultant challenging operating environment on the sector. The non-performing loans (NPL) ratio inched up, reflecting the COVID-19 pandemic-induced slowdown in credit growth and higher loan loss provisions arising from repayment challenges from customers whose businesses and cash-flows had been adversely impacted by the pandemic.

Although banks’ investment holdings increased in February 2021, the structure of the investment portfolio was unchanged from the February 2020 position. However, the movement towards longer dated instruments which led to a rise in the share of securities in total investments in the second half of 2020 reversed somewhat during the first two months of 2021, with banks increasing holdings of short-term bills so far this year.

As a result, the investments mix was virtually unchanged in February 2021 compared to February 2020. The proportion of short-term bills in total investments was 28.7 percent while securities had a larger share of 70.9 percent as at February 2021. The share of equity investments remained negligible, at 0.3 percent, at end-February 2021.


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