Banks Credit Drops by 4.6% Year-on-Year

The nominal annual growth rate of banks’ credit to customers decreased from 18.4 percent in the second quarter of 2019 to 13.8 percent in the second quarter of 2020.

This depicts a year-on-year decrease of approximately 4.6 percent

This was captured in the quarterly bulletin released by the Bank of Ghana on Monday, October 19, 2020.

This was also lower than the growth of 16.5 percent recorded at the end of the first quarter of 2020, representing a decrease of approximately 2.7 percent quarter-on-quarter, the Bank of Ghana added.  

“At the end of Q2:2020, total outstanding credit stood at GH¢52,076.42 million compared with GH¢45,773.70 million and GH¢51,924.57 million recorded in the Q2:2019 and Q1:2020 respectively”.

According to the Bank of Ghana, “the decrease in the nominal growth in credit reflected in decreases in the nominal growth in credit to both the public and private sectors”.  

In real terms, credit from the banks decreased from 10.0 percent at end of the 2019 quarter two to 2.3 percent in 2020 of the same quarter. This means that banks outstanding credit to the public and private sector dropped by 7.7percent year-on-year.

Similarly, on a quarter-on-quarter basis bank outstanding credit realised an 8.1 percent grow in the first quarter of 2020 as against the second quarter 2020 growth of 2.3 percent, indicating a decline of 5.8 percent quarterly.

“The share of total outstanding credit to the private sector also decreased to 86.7 percent at the end of the review period, from 87.8 percent recorded” in 2019 quarter two, making a marginal decline of 1.1 percent on a yearly basis, the Bank of Ghana further asserted.

In terms of the distribution of Outstanding Credit to the Private Sector, the Bank of Ghana said that “the growth of outstanding credit to the private sector decreased in nominal and real terms” by the end of the first half of the year 2020.

Expanding further, the Bank went on to say that in nominal terms, outstanding credit to the private sector decreased to 12.4 percent in the second quarter of 2020 from 16.8 percent recorded in the equivalent quarter the previous year. This was also below the 17.1 percent growth registered at the end of the first quarter of the year.

“The outstanding credit to the private sector at the end of the second quarter of 2020 was GH¢45,157.13 million, compared with GH¢40,169.74 million and GH¢45,339.53 recorded in Q2:2019 and Q1:2020 respectively”.

The annual growth rate of outstanding credit to the private sector decreased to 1.1 percent at the end of quarter two, from 8.6 percent recorded in the same period in 2019 as measured in real terms, the Bank of Ghana remarked.

In conclusion, the Bank of Ghana highlighted that “The decrease in credit to the private sector during Q2:2020 when compared with Q2:2019 reflected in decreases in annual flow of credit to the following sectors: Commerce & Finance, Miscellaneous, Manufacturing, Mining & Quarrying, and Elec., Gas & Water. However, major beneficiary sectors of annual flow of private sector credit in the second quarter of 2020 were Services, Transport, Storage & Communication, Agriculture, Forestry & Fisheries, and Import trade saw significant increases in credit flow in June 2020 when compared with the corresponding period in 2019”.