Banks withhold funds from private sector

The latest Bank of Ghana survey of credit conditions in the country reveal a general net easing of credit conditions by Deposit Money Banks (DMBs).

According to the survey, with the exception of consumer credit and long term credit to large enterprises, which saw some tightening, the credit stance for all other loan types including SMEs, large enterprises, short term and mortgage loans were eased during the period.

However, the annual growth in private sector credit slowed to 33.5 percent in nominal terms at the end of June 2013, from 39.0 percent in June 2012. Similarly, annual growth of real private sector credit was 20.1 percent in June 2013, down from 27.0 percent in June 2012.

But the banking sector performed well during the first half of the year, with increased competition, asset growth, improved liquidity and profitability.

Total assets of the banking industry as at the end of June 2013 increased to GH¢30.6 billion, compared with GH¢24.6 billion in June 2012. This was driven mainly by advances, which accounted for 44.7 percent of the total. The asset growth was mainly funded by deposits which recorded an annual growth of 13.3 percent to GH¢20.4 billion at the end of June 2013.

Non-Performing Loans (NPL) ratio within the banking industry decreased to 12.8 percent in June 2013, from 13.2 percent in June 2012. The ratio excluding the loss category also declined to 4.7 percent from 5.9 percent in the same period.

The composition of banks’ credit portfolio by users shows that public enterprises accounted for 4.6 percent of gross loans in June 2013 compared with 4 percent in June 2012. Loans to private enterprises accounted for 72.6 percent of gross loans in June 2013, down from 75.5 percent recorded in June 2012.

The share of household loans in gross loans however increased marginally to 15.8 percent in June 2013 compared with 15.4 percent in June 2012. Also, credit to Government and Public institutions constituted 4.6 percent of gross loans in June 2013, compared with 4.0 percent in June 2012.

The sectoral allocation of credit shows that Services sector share of credit exceeded the Commerce & Finances share as at June 2013. Services sector accounted for 26.9 percent of credit compared with 24.7 percent in June 2012.

Commerce & Finance received 25.5 percent of the total credit in June 2013 compared with 28.5 percent recorded in June 2012. The manufacturing sector’s share also increased marginally to 9.6 percent at end June 2013 from 9.3 percent at end June 2012.

Together, these three sectors accounted for 62.1 percent of total credit allocated in June 2013 compared with 62.5 percent in June 2012. Credit allocation to other sectors including Construction, Transportation, Storage & Communication, Electricity, Gas & Water improved while Agriculture, Forestry &Fishing, Mining & Quarrying sectors declined during the review period.

Off-balance sheet exposures (contingent liabilities) increased by 6.0 percent to GH¢3.61 billion at end June 2013 compared with 32.8 percent growth recorded in the corresponding period in 2012. The ratio of off-balance sheets items to total liabilities however declined to 13.8 percent in June 2013 from 16.0 percent in June 2012