Private sector credit growth slows drastically
• Dr Ernest Addison — Governor, BoG

Private sector credit growth slows drastically

Micro, small and medium-sized enterprises (MSMEs), which form a chunk of players within the private sector, continue to feel the brunt of the reluctance of commercial banks to provide facilities to sustain and improve the sector.


The development is evident from the central bank’s report that confirmed that growth in private sector credit continued to remain weak. 

After its Monetary Policy Committee (MPC) meetings, the bank announced at its news briefing that “Private sector credit growth slowed to 10.8 per cent in April 2024 from 19.8 per cent in April 2023. 

In real terms, credit to the private sector contracted by 11.4 per cent relative to a 15.2 per cent contraction recorded over the same comparative period.

Analysts have attributed the development to the high non-performing loans ratio, which has become a disincentive for the banks to continue lending to the private sector going forward.

They maintained that after suffering the severe brunt of COVID-19 and the Domestic Debt Exchange Programme (DDEP), which resulted in serious impairment of their balance sheet, the last thing banks would want to do was to take on extreme risks, such as lending to a sector that is not performing as a result of the deteriorating economic conditions, at the expense of the interest of their shareholders and their customers.

The analysts also warn that until the economic situation improves and the banks can sustain their profit-making trajectory on the back of their heavy involvement in government coupons, lending to the private sector will continue to suffer.

“If you are presented with two scenarios, one being making money from government coupons, which are relatively risk-free, and two, lending to the private sector, which is struggling to survive, which will you opt for as a bank?” one of the analysts asked and noted that “the banks are not to blame for opting for the government coupons because they must survive”.


According to the central bank, the non-performing loan ratio soared to 25.7 per cent in April 2024 from 18.0 per cent in the same period last year.

That, the bank attributed to, the lagged effect of the COVID-19 pandemic and the economic crisis of 2022, which led to the downgrading of several large exposures of banks. 

Meanwhile, the Bank of Ghana (BoG) said, the sector was expected to be strengthened as banks recapitalised and enforced stringent credit underwriting standards.

Banks rebound

The ordeal of the private sector comes at a time when the banking sector indicators point to a recovery from the impact of the DDEP. 

For instance, total assets increased by 28.8 per cent to GH¢306.8 billion at the end of April 2024 driven by domestic currency deposits and other funding sources. Banks also reported higher profits for the first four months of 2024, relative to the same comparative period in 2023.

It also became evident that key financial soundness indicators generally improved during the review period. 

The capital adequacy ratio adjusted for reliefs increased to 15.5 per cent in April 2024 from 14.7 per cent in April 2023, reflecting the rebound in profits. 

The capital adequacy ratio without relief for the banking system was 11.5 per cent at the end of April 2024 compared to 7.6 per cent in April 2023. 

Liquidity and efficiency indicators also improved in April 2024, compared to the same period last year.

Connect With Us : 0242202447 | 0551484843 | 0266361755 | 059 199 7513 |

Like what you see?

Hit the buttons below to follow us, you won't regret it...