Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, has said that the central bank is optimistic that private sector credit will begin to rise.
He has pointed out that although a decline in private sector credit is not new, the BoG has taken measures to address the situation.
He said this at the 125th Monetary Policy Committee (MPC) press conference, when his attention was drawn to the fact that there has been a consistent decline in real private sector credit since the beginning of the year.
Asked what accounted for this trend, Governor Asiama said that “Indeed, this trend is not entirely new. In fact, when you examine private sector credit as a percentage of GDP and compare Ghana to its peers within the sub-region, we appear to be lagging.
“This reality is behind the initiatives we have undertaken since I assumed office. Our objective is to transition into a regime where credit becomes a central focus for banks. As financial intermediaries, their core function is to mobilise funds from savers and channel them to productive users. Based on the data available to me, we are making steady progress toward that goal.
“We are optimistic that private sector credit will begin to rise. As that happens, we expect further declines in inflation. Treasury bill rates have already started to fall, and as inflation continues a downward trajectory, the Monetary Policy Committee has indicated its readiness to adjust the policy rate accordingly.”
In the area of non-performing loan (NPL) ratios, Dr Asiama stated that as part of efforts to address the rising trend, commercial banks have been directed to strengthen their credit administration systems.
Dr. Asiama noted that soon, banks will need to rely more on the performance of their loan portfolios to sustain returns.
He disclosed that the NPL ratio currently stands at 23.1 percent, a level that requires continuous supervisory attention.
When asked what accounted for the figure and what measures were being taken to address it, Dr. Asiama said:
“We have been actively working to address the issue of high non-performing loans. As I mentioned in my opening remarks, the current level of NPLs remains a concern. In response, we have recently issued new regulatory notices to banks aimed at tackling this challenge.“
He explained that the Bank of Ghana’s goal is not only to reduce NPLs but also to strengthen credit administration frameworks within banks. This, he stressed, is crucial as the economy transitions away from persistently high interest rates.
Currently, he observed, Bank of Ghana bills provide attractive returns, enabling banks to invest and report strong bottom lines. However, this phase, he cautioned, is nearing its end.
“Soon, banks will need to rely more heavily on the performance of their loan portfolios to generate returns. This makes it imperative for them to enhance credit administration and reduce NPLs in order to sustain profitability in the evolving financial landscape,” Dr. Asiama added.
