Banking Sector Grows By 50%
The banking industry continues to dominate the business segment of the economy as total assets of the banking system grew by 50.4 percent in 2007 as compared with 41.1 percent in 2006.
With the number of banks expected to increase from 24 to 26 because of the likely presence of Bank of Baroda from India and Sahel Bank which has its headquarters in Libya, banks assets would go up significantly before the new capital requirement commences.
According to figures from the Bank of Ghana, total assets of the current 24 banks operating in the country are GH¢7.795 billion which is 56.7 percent of gross domestic product (GDP).
Importantly, the fourth quarter of 2007 results showed strong asset growth and significant improvement in all the financial soundness indicators relative to December 2006.
Analysts believe that the consistent revision of the fiscal and monetary policies instituted by the Central Bank has played a major role in this development.
Instructively, banks credit to the private sector grew by 59.8 percent, from GH¢1.234 billion to GH¢3.298 billion.
With the distribution of the increase in credit for the year being broad-based, the services sector accounted for 27.5 percent followed by commerce which accounted for 22.3 percent.
Miscellaneous, construction and manufacturing accounted for 18.1, 9.5 and 6.2 percent respectively.
The figures further revealed that the rapid expansion in the portfolio of the banks was funded mainly from increases in deposits. Savings deposits rose by 48.1 percent to GH¢1.826 billion during the year.
The quality of bank's loan book continued to improve during the year with non-performing loans ratio declining from 7.9 percent in December 2006 to 6.9 percent in December 2007.
Also, average base rate quotations of the banks, which determine interest rates, were revised upwards by 29 basis points between September and December 2007.
Meanwhile, the Association of Ghana Industries (AGI) has expressed concern about the low level of credit to the manufacturing sector saying the inadequate lending to that sector would slow the country's economic growth.
Cletus Kosiba, Executive Secretary of the AGI told CITY & BUSINESS GUIDE that the 6.2 percent credit to the manufacturing industry is so small that it makes the transition of the economy to manufacturing very difficult.
The manufacturing industry is considered as the bedrock of every advanced economy, thus the low level of credit to the sector would affect the growth of the Ghanaian economy, he added.By Charles Nixon Yeboah