The Bank of Ghana in its monetary policy report has indicated that lending to the private sector increased significantly in February 2023 to GH¢65.50 billion, compared with GH¢50.59 billion recorded in February 2022.  

According to the Central Bank, outstanding credit to the private sector at the end of February 2023 was GH¢65.50 billion, compared with GH¢50.59 billion recorded in February 2022.

“In real terms, private sector credit contracted by 15.3 percent compared with 1.2 percent contraction recorded over the same comparative period,’’ the report said.

The Central Bank explained that the development reflected portfolio reallocation by banks and exchange rate revaluation on foreign currency denominated credit.

Consistent with the economic growth rate where the service sector experienced the highest growth rate of 10.1 percent in the first quarter, the sector received the highest credit with a percentage share of 30 percent among other sub-sectors in the private sector.

The Central Bank o’served that credit flow to the private sector remained concentrated on sectors, including services, import trade, manufacturing, mining and quarrying, and agriculture, forestry, and Fisheries.  

Compared to the 84.9 percent recorded in the same time of 2022, private sector credit made up 86.4 percent of the overall flow of credit granted to both private and public institutions in February 2023.

Fitch Solutions’ Assessment of Ghanaian Banks

Fitch Solutions also in its assessment of the Ghanaian banking sector predicted that banks’ lending activities would focus on private sector instead of the public sector owing to fiscal consolidation programme under the International Monetary Fund (IMF).  

To that end, the rating agency indicated that banks would be more selective to the sectors they lend to, especially subsectors with high non-performing loans ratio.  

It agreed with the Central Bank’s findings on lending to households and firms as demand for loans by firms and households experienced a net decline in the same month.  

While the Central Bank blamed the decline in lending to households to a net decline in the demand for mortgages, the rating agency blamed it on rising interest rates.

Domestic credit to private sector (% of GDP) in Ghana was reported at 12.16 % in 2022, according to the World Bank collection of development indicators, compiled from officially recognized sources.

Outstanding credit to the private sector at the end of June 2022 was GH¢57.16billion. In real terms, private sector credit grew marginally by three percent in June 2022. Real growth in private sector credit inched above the long-run trend.

In the coming months, banks will continue to tighten their stance on credit to the private sector, results from the latest Bank of Ghana credit conditions survey have shown.

This, according to the central bank, stems from the increase in lending rates and general uncertainty surrounding performance of the economy stemming from sharp depreciation of the Ghana cedi and rise in the inflation rate this year.

Banks reported an increase in overall demand for loans by enterprises over the survey period from a sharp increase in loan-demand by large enterprises, particularly for long-term loans. They also projected a further increase in demand for loans during the next two months, driven by increases in demand for all categories of enterprise loans.