Banks Cut Loans To Customers

Banks Cut Loans To Customers

Banks in Ghana have cut down credit to its customers from GHC29.1billion in August to GHC28.7billion by the end of September 2015 according to the latest Bank of Ghana macroeconomic and financial report.

The marginal reduction coincided with a sudden rise in non-performing loans from 13 percent in August to 13.5 per cent in September -- the first time in more than 12 months that bad loans on the books of banks have seen such a quantum leap.

According to a Bank of Ghana’s recent report, the firm stance taken by financial institutions regarding granting loans to large enterprises and consumers has been exacerbated by lower expectations of banks regarding the economic environment, reduced access to market finance, increased cost of funds, and balance sheet constraints.

The cut in loan advances is thus considered as a further tightening of credit to customers, since a difficult business operating environment has caused many businesses and consumers to default on their loans.

Meanwhile the increasing risks in providing consumer and business loans have also pushed the banks to prioritise investments in Treasury bills and other securities over interest income.

It is widely believed that the problem of obtaining bank loans has been aggravated by the erratic power supply, uncertainty in the cedi, which has impacted negatively on input costs and production output of smaller firms -- putting substantial pressure on profit margins.

Credit: BnFT

 

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