Credit risk remained elevated during the third quarter of 2023, reflecting the sharp increase in the stock of non-performing loans in the banking industry, which translated into a higher NPL ratio.

According to the Bank of Ghana’s November 2023 Monetary Policy Report, the stock of gross loans and advances (domestic and foreign) contracted between October 2022 and October 2023, reflecting a slowdown in new lending by banks and the effect of the appreciation of the Ghana cedi on the outstanding loan balance during the review period.

Therefore, gross loans declined by 9.5% to ¢73.5 billion at end-October 2023, compared to the 57.5% growth in October 2022.

New loans by banks for the first 10 months of 2023 were lower at ¢40.9 billion compared to ¢45.3 billion in the same corresponding period last year.

The decline in gross credit reflected contractions in both components.

Private sector credit shrunk 7.5%

Private sector credit shrunk by 7.5% to ¢67.4 billion in October 2023, relative to 57.2% growth in the corresponding period last year.

This was attributable to the 12.7% contraction in loans to private enterprises, which was offset by a 17.0% growth in loans to households.

Public sector credit declined by 27%

Public sector credit also declined by 27.0% to ¢6.1 billion at end-October 2023 compared to the 59.2% growth in October 2022.

Given the sharper contraction in public sector credit, the share of private sector credit in total credit rose to 91.7% in October 2023 from 89.7% in October 2022, whereas the share of public sector credit declined from 10.3% to 8.3% during the same review period.

Services sector accounts for largest share of credit

In terms of sector distribution, credit to the services sector was the largest, accounting for 34.1% of total credit at end-October 2023 compared to 32.2% in October 2022.

The commerce and finance sector came second, with a share of 22.6%, up from 20.5% in October 2022, while the manufacturing sector accounted for a 10.3% share, marginally down from 10.5% in October 2022.

Together, these three sectors accounted for 67.0% of total credit in October 2023, compared with 63.2% in October 2022.

The mining and quarrying sector was the lowest recipient of total credit with a share of 3.0%, up from 2.2% during the period under review.