Despite significant improvements in Ghana’s banking sector, the high ratio of Non-Performing Loans (NPLs) remains a challenge, with NPLs rising to 24.3% in August 2024, up from 20.0% in the same period last year. This indicates that nearly a quarter of all loans issued by banks are not being repaid, meaning for every GH¢1,000 in loans, around GH¢250 is classified as non-performing. The increase in defaults, especially from large borrowers, reflects elevated credit risks in the sector, according to the September Monetary Policy Committee (MPC) report from the Bank of Ghana (BoG).
Many in the business community attribute the rise in NPLs to economic pressures such as high inflation, a volatile currency, high utility costs, and heavy taxation on imports and operations. Businesses struggle to meet their loan obligations due to these factors, leading to decreased profits and sometimes eroded capital. Several business representatives have called for significant economic reforms to help businesses grow, create jobs, and support the banking sector.
Despite the NPL concerns, the banking sector has shown positive trends. For example, assets grew by 38.7% by the end of August 2024, compared to 19.6% in August 2023. Additionally, profitability increased, and the industry’s Capital Adequacy Ratio (CAR) improved to 10.3% from 7.5% last year. Private sector credit also grew significantly, rising by 21.7% in August 2024 from 10.7% in August 2023. In real terms, private sector credit showed a 1.1% growth, compared to a 21.0% contraction the previous year.
In the money market, interest rates for Treasury bills generally trended downward. For instance, the 91-day and 182-day Treasury bill rates fell to 24.85% and 26.76% in August 2024, down from 26.35% and 27.84% in August 2023. The 364-day rate also dropped to 27.90% from 30.88% during the same period. However, the weighted average lending rate on the interbank market increased to 28.84%, up from 26.59% in August 2023.
SOURCE: https://dew360.net
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