Loans to consumers declined by ¢1.24bn in May, says Bank of Ghana

Credit to the private sector declined by ¢1.24 billion in May 2020, according to the latest Bank of Ghana (BoG)’s Statistical Bulletin.

This occurred during the peak of the coronavirus pandemic when the government partially lockdown the economy for three weeks, beginning March 31, 2020.

According to the data, the banks and other financial institutions loaned ¢17.09 billion, ¢15.59 billion and ¢14.35 billion to consumers in March, April and May 2020 respectively.

But the drop in credit from March to May 2020 is largely attributed to banks tough stance on credit, amid the coronavirus pandemic.

Instructively, most of the banks in Ghana began revising downwards their budget for loans and advances to consumers immediately covid-19 started creating global uncertainty, some credit analysts told Joy Business.

The revised lending activities meant the financial intermediaries are mindful of their asset quality, in this era of uncertainty in the Ghanaian and global economies.

Fast forward, majority of the banks are expected to adopt a wait and see attitude going forward till the covid-19 pandemic starts seeing signs of improvement.

MPC Report

The July 2020 Monetary Policy Report revealed that Domestic Money Banks (DMBs’) credit to the private sector slowed in June 2020 on account of elevated default risks and moderated demand for credit, reflecting the impact of the Covid-19 pandemic on the real sector.

Annual growth in private sector credit thus declined to 12.4 percent in June 2020 compared with 16.8 percent growth in the same period of 2019.

Half-year financial performance

First half-year financial statements of some banks sighted by Joy Business revealed that the banks net fees and commissions grew marginally or went down. This is largely attributed to a tight stance on credit to the private sector.

For instance, CAL Bank witnessed a reduction in net fees and commission [an income banks largely rake in from fees charged on loans]. It declined from ¢261 million a year before to ¢242 million at the end of June 2020.

However, Societe Generale increased its net fees and commissions by 9% to ¢341 billion in the first half of the year.

Most of the income was expected to have been realized in the first quarter of 2020, a period in which Covid-19 was extremely low.