Some banks in the country have begun suspending loans, particularly to new customers.

This follows the increase in the policy rate by the Bank of Ghana to 24.5%.

Joy Business understands that some of the foreign banks operating in the country have sent emails to their Relationship Managers and Officers to put on hold lending to new customers.

This is to help reduce their risk exposure in advancing loans to new customers.

Usually, in times of rising interest rates,  banks’ non-performing loans also shoot up, a reason why some financial intermediaries suspend or slow down lending, particularly to fresh customers. This is to help keep the non-performing loans in check.

Therefore, despite the demand for loanable funds going up during times of economic challenges, supply remains low.  

However, existing and credit-worthy customers will continue to receive loans, but at a higher rate.

BoG attributed increase policy rate to rising inflation

The Bank of Ghana last week adjusted upwards its policy rate – the rate at which it lends to commercial banks – by 250 basis points to 24.5%.

It attributed the increase in its base lending rate to rising inflation and the depreciation of the cedi.

“Inflation remains elevated and the balance of risks is on the upside. Although the forecasts are for monthly inflation to continue to slow down, the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations. The Committee remains committed to re-anchoring inflation expectations and returning to a disinflation path”.

Credit to corporates, households tighten

According to the latest Banking Sector Report by the Bank of Ghana, the latest credit conditions survey conducted in August 2022 indicated an overall net tightening of credit stance to corporates and households by the commercial banks.

This was reflected in the steady increase in average lending rates.

This notwithstanding, new advances increased by 56.1% year-on-year to ¢33.8 billion in August 2022, relative to a 4.9% increase in August 2021.