Finance

Ghana: Banking loans to the private sector grew by 18.3% in 2019

Ghana: Banking loans to the private sector grew by 18.3% in 2019
Tuesday, 11 February 2020 13:29

Last year, companies operating in the private sector in Ghana obtained a total of 44.5 billion cedis (about $8.1 billion) in credit from commercial banks. This makes an increase by 18.3% compared to 2018 when growth was 10.6%, the Central Bank’s monetary policy committee reports.

The good evolution is the result of growing demands for credit in the Ghanaian private sector, motivated by good economic growth outlook, and the improvement in the banks' ability to finance the economy, following capital increases at the end of 2018. Banks had more liquidity and therefore more capacity to finance the economy.

On a macroeconomic level, Ghana performed well in 2019. Prices of main export commodities (cocoa, gold, and oil) grew by more than 10% over the year, with gold peaking at 18.4%. Surplus revenues boosted the dynamism of the services, trade and finance sectors, which benefited from most of the lending to the private sector in 2019.

In an analyst note released on Feb 5, Moody’s estimated that lending to private sector will follow an upward trend in 2020, thanks to the reduction in bad debts which now put less pressure on the banks’ asset quality. The share of bad debts in the total lending slid from 25.8% in April 2018 to 13.9% at the end of December 2019, according to the rating agency.

The performances of the 9 local banks listed on the Ghana Stock Exchange is now to be followed to assess the impact of the positive dynamic of the banking sector. Together, the 9 banks have a combined capitalization of nearly $1.7 billion.

Idriss Linge

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