Lending to agric declines over time

Compared with total lending to other sectors, the agricultural sector has witnessed a reduction in lending by banks in percentage terms over the last five years.

However, lending to the sector in absolute terms has been rising steadily in line with total increases in the general lending portfolio of the banks.

Data from the Bank of Ghana indicate that out of GH¢9.65 million (¢96.52 billion) credit given out by the banks at the end of 2003, GH¢l million(¢10 billion), representing 10.4 per cent, went to the agricultural sector.

Even though total credit to agriculture went up in figures to GH¢1.178 million (¢1l.777 billion), it represented 8.5 per cent of the total credit of GH¢13.92 million (¢139.23 billion) which went to all sectors at the end of 2004.

"In 2004, lending to the agricultural sector was GH¢1.27 million (¢12.07 billion), a reduction in percentage terms to 6.6 per cent compared with the total lending of GH¢ 18.32 million (¢ 183 .205 billion).

Total credit to agriculture was GH¢1.57 million (¢15.73 billion) for last year as compared to GH¢25.4 million (¢254 billion) for all the other sectors. It represents 6.2 per cent of total lending.

As of June this year, lending to agriculture had reached GH¢847,000 (¢8.47 billion), while credit to all sectors was GH¢16.94 million (¢169.4 billion), representing five per cent.

In effect, the quantum of lending to agriculture has been rising but reducing when expressed as a percentage of the overall lending portfolio of the banks.

The Growth and Poverty Reduction (GPRS) strategy of the country places(emphasis on agriculture as one of the three pillars to be used to reduce poverty in the country.

A recent report on the banking sector indicated that there was remarkable growth in the banking sector over the last five years, which reflected in the growth in loans and advances as well as deposits and assets of the banking industry.

"In the course of the growth, the bigger banks generally lost market share to the smaller ones. Some of the smaller banks embarked on exceptionally aggressive growth strategies” according to the Banking Survey 2007 report.

The survey was conducted by PriceWaterhouse Coopers in collaboration with the Ghana Association of Bankers (GAB) to provide general information on the country's banking sector and their performance.

Twenty out of the 23 banks in the country participated in the survey.

The National Investment Bank (NIB) recorded the industry's highest growth in deposits and shareholders fund, while Stanbic Bank came second in the industry in four growth areas.

NIB's feat of growing its deposits from GH¢23.35 million (¢233.45 billion) in 2002 to GH¢169 million (¢1.69 trillion) in 2006, was attributed to an aggressive branch network expansion, which grew by 100 per cent.

Ecobank also tripled its deposits base through yet another aggressive expansion, with Stanbic also growing its deposits from the 2002 figure of GH¢14.24 million (¢142.4 billion) to GH¢103 million (¢1.03 trillion) by the close of 2006.

Some banks also lost their advances market share in the last five years. The biggest of them were Standard Chartered Bank (SCB), which lost 5.2 per cent; ADB lost 4.2 per cent with SG-SSB losing 3.6 per cent.

The industry net advances grew by 289 per cent from the 2002 figure ofGH¢588 million (¢5,880 billion) to GH¢228.8 million (¢22,880 billion) in 2006.

Merchant Bank Ghana grew its net advances by seven fold over the period under review, with Stanbic growing 28 times higher than the 2002 figure.

But SCB suffered the largest loss in market share of advances dropping points off its 15.7 per cent market share to 10.5 per cent, as ADB also suffered a 4.2 per cent loss of the advances market share.

Barclays topped the profitability table but the survey also showed that Merchant Bank, Stanbic and The Trust Bank all improved their profitability tremendously.

Authored by: Samuel Doe Ablordeppey