Private sector credit growth has fallen slightly after peaking at 22.1 per cent in March 2019 as credit conditions tightened marginally.
According to the latest report by the Bank of Ghana, annual growth in private sector credit was 13.4 per cent in August 2019, compared with 15.8 per cent growth in the same period of 2018.
“In real terms private sector credit expanded by 5.2 per cent. The recent credit conditions survey indicated some tightening of credit stance on loans to enterprises and households despite increased demand for loans as banks continued to improve their credit risk management systems,” the central bank Governor said.
Money market rates
Touching on money market rates, he said these had broadly remained unchanged for both short-dated and long-dated instruments since the last MPC meeting, adding that the 91-day Treasury bill rate had remained steady at 14.7 per cent since July 2019 from 13.3 per cent a year ago. Similarly, the 182-day instrument is at 15.1 per cent from 14.9 per cent over the same period a year ago.
He said rates on the secondary bond market had eased marginally with yields on the 7-6 year, 10-year, and 15-year bonds trending down to 19.26, 19.57 and 19.71 per cent in August 2019, relative to 19.64, 19.75 and 20.03 per cent in June.
“The weighted average interbank lending rate has remained at 15.2 per cent since March 2019, having declined from 16.2 per cent in August 2018. Lending rates of banks averaged 23.9 per cent in August 2019.”
Banking sector status
At the start of the reforms in August 2017, he said total assets were GH¢89.1 billion for a sector that had  banks, and two years after the reform process started, total assets have increased to GH¢115.2 billion at end August 2019 even with 23 banks.
In the same direction, he said total deposits had improved from GH¢55.7 billion to GH¢76.0 billion over the same comparative period, reflecting a stronger deposit base owing to more trust and confidence in the banking sector with fewer but stronger banks.
“Banks are beginning to refocus on their core mandate of financial intermediation based on the strong capital base after recapitalisation. The industry's Capital Adequacy Ratio (CAR), computed in accordance with the new Capital Requirement Directive (CRD) under the Basel II/III capital framework, stands at 19.8 per cent in August 2019, well above the 13 per cent minimum regulatory benchmark,” he disclosed.
Banks' asset quality
“Asset quality has continued to improve with a decline in the Non-Performing Loans (NPL) ratio from 21.3 per cent in August 2018 to 17.8 per cent in August 2019. Excluding loans in the 'loss' category, however, 7 the NPL ratio has declined from 11.7 per cent to 8.9 per cent over the same comparative period.
“The NPL ratio is trending in the right direction and is expected to be sustained by continued implementation of the NPL write-off policy, intensified loan recovery efforts, and stronger credit risk management practices.”