To keep businesses afloat and rescue others from the vagaries of the Covid-19 pandemic, banks in the country have so far supported them in different forms to the tune of ¢3.6 billion, the President of the Ghana Bankers Association (GAB), Mr Alhassan Andani, has disclosed.
The amount, he said, was in the form of new loans; rescheduling of loan repayments and interest write-offs, among other things.
In an exclusive interview with the Daily Graphic in Accra on Thursday, Mr Andani said banks in the country met to discuss the various economic actors to ascertain the impact of the pandemic on their businesses, hence the support to ensure that they stayed afloat.
Explaining further how the decision to support the businesses arose, Mr Andani said: “The first line of action was to rescue some of the businesses. Businesses run on cash flows and we have been used to people moving goods and services across but this was no longer happening, yet companies have imbedded cost.
They have employees who were home but had to be paid, they had rents and utilities to pay and these are contractual. So these kinds of entities needed immediate rescue and we were there to help,” he noted.
Restructuring of loans
Mr Andani, who is also the Managing Director of Stanbic Bank Ghana, said the banks, therefore, met with some of the affected businesses to restructure whatever existing facilities they had with the banks to keep them going.
“We suspended their obligations to pay back their loans while they get themselves together. In certain cases, we have had to give new money in order to keep certain contractual obligations going.
“As an industry, we all sat together and said, look, it’s a massive systemic risk which means that it impacts everybody so how do we deal with it. We as CEOs of all the banks sat down and put this scheme together to support businesses,” he explained.
He said at the last count in the first week of May, banks had rescheduled principal repayment of loans to the tune of about GH¢1.6 billion.
Mr Andani said in spite of the risk in giving out loans in this period, banks had still gone ahead to disburse new loans in excess of GH¢1 billion to businesses and individuals.
“Within this period, one would have thought that with COVID, and the risk and uncertainty created, whatever facility we granted to our customers, we would have taken it away but we didn’t. We continued to disburse new facilities,” he said, adding that; “And even in the middle of the COVID, there were some we needed to give new money to top up their old loans in order to keep them going.
“If we put everything together, we are talking about GH¢3.6 billion,” he reiterated.
Interest rates trending down
Mr Andani also pointed out that due to monetary policy direction of the Bank of Ghana, interest rates were beginning to trend downwards, which was also good news for businesses.
“Before COVID and now, if you look at the interest rate structure, borrowing cost would have come down between three and four percentage points,” he said.
Impact of COVID-19 on banking sector
Commenting on the impact of COVID-19 on the banking sector, he said the pandemic came as a significant global risk, significant country risk, significant business risk, and individual risk.
He said although the pandemic had shaken the foundation of banking, banks, according to him, were more positioned to manage such risks.
“The business of banking is managing risk so while COVID will present real first time experience of risk to other institutions, for us as banks, we are already used to risks.
“The financial crisis of 2008 and several other financial meltdowns meant that we as banks have always tried to understand risk, manage risk and to ensure that there is stability in what we do. We were not prepared for COVID but we had some fundamental premise on how to manage it,” he noted.