ADI gets tough on BoG over lack of credit support for private sector

The Alliance for Development and Industrialisation, (ADI), one of the leading think tank groups in the country, has taken a swipe at the Bank of Ghana, demanding from the Governor to show clearly how he is going to mandate the banks to support the private sector.

The Bank of Ghana has spent close to GH¢18 billion to clean up the banking sector and provide liquidity support for some banks.

ADI said in a statement that after the GH¢18 billion clean-up exercise by the bank of Ghana, it does not appear to have impacted the economy.

“The banks are not ready to support the private sector, so why should the government uses taxpayers money to support the banking industry, especially banks that were technically insolvent, due to bad corporate governance and mismanagement,” the statement said.

“We want the governor of Bank of Ghana, Dr Ernest Addison, to unveil to us what per cent of banks’ capital should go to support the private sector. In Nigeria for instance, the Central Bank of Nigeria has come out with a caveat that 50 per cent of banks capital should be lent to the private sector. We want the same policy to be replicated here,” according to Francis Mensah, the Convener of ADI.

The decision by the Central Bank of Nigeria was at the back off how banks repatriate huge profits from the country to their parent companies without the much need support to the private sector.

“You cannot keep taxing the private sector while you are not committed to their agenda. You don’t set rules, for the rules to favour one party. We must replicate what the central of Nigeria is doing to grow our private sector,” the statement said.

This would feed into the continental free trade agenda since most of the companies would become more competitive on the global market.

The banking sector profitability growth soars for the first months of 2019 but has decided to tighten their credit stance to the private sector.

The latest banking report from the statutory regulator, the Bank of Ghana has revealed that the profitability of the banking industry improved during the first four months of 2019 compared with the same period last year.

The industry recorded an after-tax profit of GH¢1.1 billion, representing year-on-year growth of 38.9 per cent compared with 5.8 per cent growth for the same period last year. The higher growth in net profit was underpinned by higher growth of net interest income during the review period.

Surprising to note, growth in gross loans and advances slowed from 6.8 per cent in April 2018 to 6.1 per cent in April 2019. In nominal terms, growth in the stock of credit to the private sector comprising private enterprises and households slowed by 3.5 per cent to GH¢34.0 billion in April 2019 compared to 5.5 per cent annual growth in April 2018.

In real terms, private sector credit contracted by 5.4 per cent in April 2019 compared with a contraction of 3.7 per cent a year ago. 

Credit to households amounted to GH¢8.4 billion in April 2019 compared with GH¢7.2 billion in the same period last year, indicating a yearly growth of 16.4 per cent. Real growth in credit to households, accordingly slowed to 6.3 per cent in April 2019, compared with 28.6 per cent in April 2018.

Banks profitability growth has continued to increase, which means banks are making more money in the country but have decided to squeeze the private sector in terms of credit.

Leave A Comment

Your email address will not be published.

You might also like