Financial sector analysts are predicting a further contraction in credit to the private sector following their high contribution to the Non Performing Loans (NPL) of banks.
They argue that the development which threatens the banking industry is also likely to freeze the growth of Ghana’s banking sector.
According to the Executive Director of the Policy Initiative for Economic Development, Daniel Amarteye Anim, the development is critical hence must be addressed soon.
“If the situation remains the same we should expect that to happen because the banks are in the business of taking deposits or excess liquidity from the public for onward lending. So once they give out money and they are finding it difficult to retrieve, then they may also find difficulty in giving more credit to the private sector,” he stated.
The latest Banking Stability report by the Bank of Ghana has shown that private sector businesses accounted for almost 98 percent of banks’ Non Performing Loans.
The figure stood at 7.15 billion cedis as at April 2017 from 5.74 billion cedis in April 2016.
It went up by 24.5 percent between April 2016 and April 2017.
Mr. Amarteye Anim also predicted that businesses will highly be challenged following a compounded burden of access to credit.
This he also indicated could affect the overall economy if not properly addressed.
“Even in the situation that happens, it may lead to an increase in the interest rates that will go along with the loan facility and that will not be in the interest of business operations in the domestic economy,” Mr. Anim further remarked.
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By: Pius Amihere Eduku/citibusinessnews.com/Ghana