ADI rages against lack of private sector credit support | Economic news

The Alliance for Development and Industrialization (ADI), one of the country's leading think tanks, has visited the Bank of Ghana, asking the governor to show clearly how he will mandate the banks to support the private sector and not to create a safe haven for banks.

The Ghanaian bank has spent nearly 18 billion GHC of taxpayer money for cleaning and providing cash support to some banks.

According to the ADI, after this 18 billion GHC sanitation exercise by the Ghana Bank, to what extent did this have an impact on the economy.

"Banks are not ready to support the private sector, so why should the government use taxpayer money to support the banking sector, especially technically insolvent banks, because of poor governance? corporate and mismanagement, "the statement said.

"We want the governor of the Bank of Ghana, Dr Ernest Addison, to tell us what percentage of bank capital should be used to support the private sector. In Nigeria, for example, the Central Bank of Nigeria issued a warning that 50% of bank capital should be lent to the private sector. We want the same policy to be reproduced here, "said Francis Mensah, the coordinator of the ADI

The decision of the Central Bank of Nigeria was at the origin of how the banks repatriated huge profits from the country to their parent companies without the indispensable support needed by the private sector.

"You can not continue to tax the private sector until you are attached to their program. You do not set rules for rules to favor a party. We need to replicate what Nigeria's central bank is doing to develop our private sector, "the statement said.

This would contribute to the continental free trade agenda, as most companies would become more competitive in the global market.

Profitability growth in the banking sector rose sharply during the first four months of 2019, but decided to tighten its credit position in the private sector.

The latest banking report of the statutory regulator, the Bank of Ghana, revealed that the profitability of the banking sector has improved in the first four months of 2019 compared to the same period of the previous year.

The industry posted an after-tax profit of 1.1 billion ¢ GH, which represents a growth of 38.9% year-on-year, compared to 5.8% for the same period last year. Higher growth in net income was supported by stronger growth in net interest income during the reporting period.

It is surprising to note that growth in gross loans and advances has slowed from 6.8% in April 2018 to 6.1% in April 2019. In nominal terms, the growth of outstanding loans to the sector private sector and households slowed by 3.5% to GH ¢ 34.0 billion in April 2019, compared to annual growth of 5.5% in April 2018.

In real terms, credit to the private sector contracted by 5.4% in April 2019, compared to a contraction of 3.7% a year ago. Household credit amounted to 8.4 billion ¢ GH in April 2019, compared with 7.2 billion GH for the same period last year, which indicates an annual growth of 16.4 percent. %. Real growth in household credit slowed to 6.3% in April 2019, compared to 28.6% in April 2018.

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