Growth in private sector credit is expected to drive down the Non-Performing Loans (NPLs), a Banking Consultant, Nana Otuo-Acheampong has said.
According to him, an improved economic fundamental will also reflect in lower lending rates, going forward.
NPLs’ ratio has gone down significantly since 2016, from about 28 percent on the average to about 14 percent. But many analysts believe it is still high and is a major contributor to the high lending rates.
Nana Otuo Acheampong explained that “between 2017 and 2018, the NPL average hovered around 22%. Now for 2019, it fell by 8% to 14%. Now, it is still high relative to other jurisdictions but then what would drive it down would be growth in private sector credit.”
He holds that “because of the incidence of the pandemic, that growth although moving positively, is not at the expected rate.”
He emphasized that there are some legacy NPLs which could play a significant role once the private sector picks up.
“When we say legacy, we mean the old NPLs that we’ve not been able to recover from because of the pandemic. So now that the pandemic is easing off, we’ll see that private sector credit growth will move up and once it moves up, it’s got an inverse relationship with NPL,” he said.
Cost of credit presently hovers around 21.5 percent on the average.
July 2020 Banking Sector Development Report
Gross loans and advances grew by 16.3% to GH¢45.0 billion in June 2020 from a virtually unchanged growth position a year earlier.
Net loans and advances (gross advances adjusted for provisions and interest in suspense), also grew by 14.7% to GH¢38.9 billion against a 4% growth in June 2019.
Credit growth however slowed in the first quarter of 2020 due to the tight credit stance by banks and low credit demand at the onset of COVID-19 but has witnessed some rebound in the second quarter of this year.
On the other hand, asset quality improved year-on-year with the NPL ratio declining from 18.1% in June 2019 to 15.7% in June 2020.
This was on account of the marginal increase in the stock of NPLs by 0.7 percent against the 16% growth in credits over the period.
Latest Stories
-
Ghanaians need honesty on the part of the government – Alhassan Suhuyini
4 mins -
We cannot compete; we need to collaborate – George Quaye on projecting theatre
17 mins -
GRIDCo to receive 100MW power supply from IPPs in coming days
24 mins -
How technology is weaving African markets into the global fabric
28 mins -
Dr. Ekua Ekumah highlights how to cultivate new theatre audience
38 mins -
Zambian FA president charged with money laundering
56 mins -
Mysstel releases video for ‘Paradise’
59 mins -
We are yet to receive an apology from Ashanti Regional Minister – ECG
1 hour -
UEFA International Tournament: Ernest Ofori scores for Black Starlets in defeat to Russia
1 hour -
Cocoa price surge linked to production decline – COCOBOD CEO
1 hour -
Atarah Praise returns on May 19 at Adenta Barrier
1 hour -
World Robotics Championship: 18 pre-tertiary students poised to win medals for Ghana at global competition
1 hour -
Drowned widow was scammed out of $1.5m on dating app hoax, left note about secret ‘double life’
2 hours -
ECG workers threaten to disconnect power from Ashanti Regional Minister’s home
2 hours -
Brain tumour shatters 20-year-old’s dream of becoming a doctor
2 hours