Credit conditions tightened in the country – BoG survey

The Bank of Ghana (BoG) on Wednesday said its latest survey shows that it has become very difficult to get loans from banks in the country.
Dr Kofi Wampah, BoG Governor, said the credit stance for all loan types tightened during the period 2013.
He said the survey also showed that the number of loan applications from households, small, medium and large enterprises, a measure of credit demand, decreased.
Dr Wampah who revealed this during a presentation of the Bank’s Monetary Policy Committee’s (MPC) Report in Accra said, the principal reasons cited for rejection of loan applications included poor credit history, low cash flows, inadequate security, weak management and weak financials.
He said for the first 10 months of the year, broad money (M2+) grew by 20.8 per cent, compared with 21.9 per cent during the same period last year.
This, he said, was largely on account of a sharp slowdown in growth of foreign currency deposits, even though this was moderated by increases in domestic currency deposits.
'The pace of annual growth in private sector credit slowed to 25.0 per cent at the end of October 2013, compared to 44.3 per cent during the same period in 2012.'
“Similarly, the annual growth of real private sector credit was 10.5 per cent in October 2013, compared to a 30.5 per cent growth in 2012.
“Ghana's banking sector continued to record strong growth during the first nine months of the year,” the Governor stated.
He said the sector remained relatively stable, benefiting from healthy capitalization, as well as sound liquidity and profitability.
Dr Wampah said total assets of the banking industry as at the end of September 2013 rose to GH¢33.9 billion, from GH¢25.1 billion in September 2012, declaring that this was driven mainly by advances, which accounted for 46.6 per cent of the total figure.
He said the asset growth was mainly funded by deposits which recorded an annual growth of 18.1 per cent to GH¢21.1 billion at the end of September 2013.
He said the non-performing loans (NPL) ratio within the banking industry decreased to 12.3 per cent in September 2013, from 13.1 per cent in September 2012, while the ratio excluding the loss category, declined to 5.0 per cent from 6.5 per cent in the same period last year.
He noted that interest rates on the money market have broadly declined.
Dr Wampah said between December 2012 and October 2013, the 91-day instrument declined to 19.9 per cent from 23.1 per cent.
He said similarly, the 182-day declined to 19.9 from 23.0 per cent, adding that the one-year note rate fell to 19.0 per cent from 22.9 per cent, while the rate on the two -year note declined to 19.3 per cent from 23.0 per cent.
He observed that the three-year bond rate fell to 19.2 from 21 per cent, while the rate on the five-year bond issued in September was 19.0 per cent.
Dr Wampah said the weighted average interbank rate declined to 16.7 per cent from 17.5 per cent in December 2012.
He said average lending rates of the banks declined marginally to 25.6 per cent in October 2013, from 25.7 per cent in December 2012.
He said the average rate on three-month term deposits remained unchanged at 12.5 per cent, narrowing the spread marginally to 13.1 per cent in October 2013, compared with a spread of 13.2 per cent in December 2012.
The Governor said based on the MPC's Report, the Bank had maintained its policy rate at 16.0 per cent, adding that the upside risks to inflation, though elevated, are mainly structural, and therefore might not need to be addressed by a policy rate adjustment at this time.