Citi Business News has gathered that banks in Ghana have reduced lending to the private sector due to the continuous rise of Non Performing Loans(NPLs).
The banks believe the move will reduce the surge in bad loans recorded on their books.
A financial stability report released by the Bank of Ghana (BoG) in November 2016 indicated that, the quality of loans on the books of banks’ hit its worst as compared to the same period in 2015.
Figures from the report also revealed that Ghanaian companies are among the major contributors of bad loans on the books of banks.
NPLs increased by as high as 69.4 percent from GH¢ 3.6 billion in July 2015 to GH¢ 6.1 billion in July 2016.
This translated into an NPL ratio of 19.1 percent, from 13.1 percent a year earlier.
The central bank then attributed this development to a number of factors, including the general slowdown in the economy, increasing cost of production due to high utility tariffs and loan portfolio reclassification by some banks.
In an interview with Citi Business News, the Managing Director of Capital Bank, Rev. FitzGerald Odonkor said his outfit is minimizing lending to avoid more bad loans on the books of the bank.
He stated that the issue has been a challenge to banks, but with the measures put in place by the central bank, the problem will improve.
“Well, I think that has been an industry-wide phenomenon for banks mainly as a result of the state of the economy but we will continue to do our best to minimize the occurrence of defaults in our payments,” he said.
“We are careful about our lending and then also we try to stay close to the clients so that where there are problems, we help to have a workout or solution to minimize it,” he added.
By: Jessica Ayorkor Aryee/citibusinessnews.com/Ghana.