Accra, Oct. 31, GNA - Credit facilities and long-term financing to enterprises remain un-met despite improvements in major indicators of the banking industry, Mr Daniel Mensah, Executive Director of the Ghana Association of Bankers, said on Tuesday.
He was speaking at a workshop organized to assess the quarterly performance of a collaboration between Exim Guaranty Company of Ghana limited and the Guarantee Fund for Private Investments in West Africa (GARI) based in Togo to assist Ghanaian banks with credit in Accra.
Mr Mensah said major improvements had been recorded in asset management, deposit mobilization and loan recovery but the types of deposit, loan procedures and consideration of credit risk made it difficult for the needs of most enterprises to be met.
He explained that total assets of the banks increased by 39 per cent over the past five years, nominal growth of loans increased by 196 per cent from 2001 to 2005, while industry deposits also increased by 22.5 per cent from 21 trillion to 26 trillion cedis between 2004 and 2005. Out of the total deposits, 56 per cent are held in current accounts, monies held in time and fixed deposits form 20 and 15 per cent respectively while average bad debt rate from loan collection for the industry improved to 11.25 per cent in 2005 from 12.9 per cent in 2004 and 15.7 per cent in 2003.
Mr Mensah said the commercial banks had good coverage throughout the country with the 23 banks having over 399 branches but these nevertheless left much to be desired in meeting, especially long-term credit facilitations to enterprises, which was a necessity for economic growth.
=93Long-term finance is essential for economic growth as it finances the development and expansion of business investment. Unfortunately, long-term resources are available in Ghana, on very limited basis, in the form of equity financing such as shares and retained earnings and long term debt such as bonds.=94 Mr Mensah said there was the need to bridge the financing gap for which he appreciated the role of non-bank financial institutions such as the Exim Guaranty Company and the GARI in underwriting credit facilities to enterprises.
He observed that the demand for long-term funds had surged in view of the current macroeconomic stability.
However, institutions like the Social Security and National Insurance Trust (SSNIT), currently holds the bulk of Ghana's long-term funds and has invested the funds in shares and bonds, other contractual savings institutions and commercial banks.
=93 He said, due to the limited long-term funding from the commercial banks, enterprises had had to seek funding from short-term cedi and foreign currency deposits, commercial loans from foreign affiliates and concessionary funds from international lending institutions.
The commercial banks have had to also finance some long-term assets such as plants and equipment through overdrafts and short-term rolled over loans in the absence of long-term funds.
As a result, Commercial bank's overdraft lending amounted to 37 per cent of total lending as at December 2005.
Mr. Mensah however, observed that the absence of long-term finance were not the main constraint to long-term lending by the banks. =93Rather, the volatile inflation and interest rates, and their associated risks, create the major obstacles,=94 he said. He therefore urged the government to grant incentives to direct local bank lending to the productive sector saying, 93proper alignment of local bank lending to the major contributors to GDP contribution is achievable; but only through very aggressive policy shift. =93The challenge for policy-makers is to use policy beyond exhortations and lip-service to affect the structure of sectoral contributions to GDP.=94
Mr Tony Oteng-Gyasi, President of the Association of Ghana Industries, said the banks had contributed greatly to the setting up of the manufacturing industry in the country.
But in current times, credit to the manufacturing sector by the banks had dwindled from 29.8 per cent to 19 per cent in the last quarter of 2005, while credit to the agricultural sector had also declined to 6.7 per cent from 12 per cent over the same period with credit to the mining sector remaining unchanged at four per cent.
Mr Oteng-Gyasi said that overall credit to the private sector had increased to 54 per cent in 2005 from 35 per cent in 2000 but said the =93essential real sectors namely agriculture, manufacturing and mining did not benefit much.=94
He observed however that, between September 2004 and September 2005, credit to the manufacturing sector increased by a whopping 33 per cent saying, 93however, it may be too early to tell if this is a trend which has started. It may be a short term blip.=94
=93Whatever the trend, it is important to recognize that credit to the real private sector requires substantial increases if the problems of poverty and unemployment are to be solved.=94
Mr Oteng-Gyasi said to solve some of the credit problems facing the manufacturing sector, it was necessary for the project officer with the commercial banks to advice clients and urged industrialists to also look for seek guidance in seeking for the loans.
He urged the banks to make known the available credit facilities through advertisement.
The theme for the workshop organized by the two companies and the Merchant Bank Ghana was 93Credit Underwriting 96 Enhancing Loan Asset Quality and Boosting Credit to the Productive Sectors of the Economy.=94
Copyright © 1994 - 2024 GhanaWeb. All rights reserved.
