Dr. Ernest Addison – Governor, Bank of Ghana

The Ghanaian banking sector is known for its high lending rates, which itself has contributed to low lending and high non-performing loans within the sector. But the Bank of Ghana has said average lending rates have fallen.

According to the Bank, the weighted average interbank lending rate, that is, the rate at which commercial banks lend to each other declined to 15.6 per cent in February 2019 from 18.3 per cent same period last year, in line with the monetary policy rate.

“Similarly, average lending rates of banks also declined to 27.8 per cent from 29.3 per cent over the same comparative periods,” the Governor, Dr. Ernest Addison, told journalists in Accra last month.

He indicated that an assessment of the banking sector shows that the recently recapitalized banking sector is profitable, liquid and solvent exhibiting strong growth prospects in the outlook, adding that in the first two months of 2019, the banking sector posted a stronger after-tax income.

“Total assets (of the banks) stood at GH¢108.9 billion, representing an annual growth of 14.5 per cent in the year to end-February 2019. The growth in total assets was funded mainly from increased deposits and equity injection from the recapitalization exercise,” he said.

The central bank notes that key financial soundness indicators of the industry have also improved, with the Capital Adequacy Ratio (CAR) at 21.7 per cent in February 2019, significantly higher than the prudential requirement of 10.0 per cent. The improved solvency enhances the banking sector’s capacity to deepen financial intermediation and strengthens banks’ resilience to shocks going forward.

The profitability ratios have also improved while liquidity measures remain broadly adequate.

The NonPerforming Loans (NPL) ratio has declined from 21.6 per cent in February 2018 to 18.2 per cent in February 2019, signalling some moderation in the industry’s exposure to credit risk. The on-going write-off policy and strengthening of bank’s risk management practices is expected to further impact positively on the industry’s NPLs going forward, the Governor said.

By Emmanuel K. Dogbevi