Banking Credit to Economic Operators Increases

EXTENSION OF banking system credit to economic operators especially to the private sector has continued to increase and the financial sector has continued to grow.

Bank credits to private and public institutions increased by ¢7,156.4 billion (37.6 percent) to ¢26,177.4 billion in the 12-months to January 2007.

The manufacturing sector absorbed 23.6 percent, followed by services 21.0%, commerce 18.4%, construction 13.6% and mining and quarrying 5.7%.

These figures were announced by the Governor of the Bank of Ghana, Dr. Paul Acquah after four days of deliberation on the status of the economy last week by the Monetary Policy Committee (MPC) of which he is the Chairman.

"In real terms, credit to the private sector increased by 32.6 percent, significantly higher than 14.9 percent recorded for the same period in 2006, and the highest in 35 months," the Governor said.

He said the financial sector is also seeing increased growth as banks take advantage of opportunities to diversify their portfolios and grow their assets.

Based on the latest data available, he said total assets of the banking industry have grown by 41.1 percent to ¢51,837.2 billion (45.1 percent of GDP) at the end of 2006, compared with 17.5 percent in 2005 (37.9 percent of GDP).

He said this development continued into January 2007 with annual growth of 38.1 percent. This was driven mainly by increases in gross loans & advances.

"The growth in the financial sector is also taking place against the background of improved financial sector soundness indicators."

The report explained that banks' solvency remained strong as the industry recorded Capital Adequacy Ratio (CAR) of 17.0 per cent as of January 2007 compared with 16.1 per cent same period in January 2006 and against a required CAR of 10 percent.

The ratio of Non-Performing Loans (NPLs) in total loan portfolio continued to decline. It fell from 11 percent in October 2006 to 7.9 percent in December 2006 and further to 7.5 percent at the end of January 2007. Similarly, NPLs net provision fell from 5.9 percent in October 2006 to 2.0 percent in December 2006 and to a low of 1.3 percent in January 2007.

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