The Bank of Ghana (BoG) has disclosed that Ghanaian banks expect lending rates to decline over the next six-months from August 2021, thus, between September 2021 and February 2022, in line with the decline in the Monetary Policy Rate (MPR) and other short-term money market rates.

According to the BoG, banks’ expectations for inflation, on the other hand, was gloomy over the same period that banks are hopeful lending rates will decline.

“Banks’ inflation expectations for six-months ahead from August 2021 increased during the current survey period, attributable to the increase in the actual inflation rate and the recent marginal volatility in the exchange rate”.
Bank of Ghana

The BoG disclosed in its latest report on the banking sector that its credit conditions survey pointed to a net ease in overall credit stance on loans to enterprises between June and August 2021, but a net tightening on loans to households.

“The net ease in the stance on corporate loans was driven by a net ease in the stance on loans to large enterprises and on long term loans. The overall credit stance on household loans, however, recorded a marginal net tightening between June and August 2021, driven by a net tightening in the stance on mortgages”.
Bank of Ghana

Increase in demand for loans

The Central Bank averred that banks projected a net ease in overall credit stance on loans to enterprises and households two months ahead of the survey period. The expected net ease in the stance on corporate loans was from a projected net ease in the stance on loans to all sub-categories of enterprise loans except for loans to large enterprises, BoG explained.

The projected net ease in the stance on loans to households was however, expected to reflect in both loans for house purchases and consumer credit. According to the BoG, the survey results indicated an increase in overall demand for loans by enterprises between June and August 2021 while the demand for loans by households remained unchanged during the period.

“The increase in demand by corporates was a result of increases in the demand for all the sub-components of enterprise credit, except for demand for loans by SMEs which softened. The sharp decline in demand for mortgage loans moderated the increase in demand for consumer credit leading to the unchanged overall demand for household loans during the period”.
Bank of Ghana

Overall, banks projected an increase in demand for loans by corporates and households between September and October 2021. The report states that the projection of an increase in demand for loans by enterprises was expected to come from increases in demand from all sub-components of corporate loans.

Increase in credit demand to cushion economy

According to the report, the expected increase in demand for household loans for September and October was, however, projected from a rebound in demand for mortgages while demand for consumer credit was expected to soften following the sharp increase in the prior two months.

The Bank of Ghana stated in the report that the banking sector performance improved with strong capital buffers to withstand shocks in August 2021, underpinned by sustained growth in total assets, deposits, and profits amid the COVID-19 pandemic.

BoG assured that the policy measures and regulatory reliefs will continue to cushion the sector to moderate the impact of potential risks. The outlook for the banking industry, according to the regulator, remains positive and projections of an expected increase in credit demand and ease in credit stance are expected to boost private sector credit to support the recovery process.