A total lending amount of Ghs 7 billion according to the Oxford Business Group was loaned to businesses by banks in the country in a space of three months – March to June – amid the heightening of the Coronavirus pandemic.
According to a report titled ‘Ghana’s Covid-19 Response’ by the Oxford Business Group, the little over Ghs 7 billion loaned out to businesses was enabled by the cutting down of the policy rate by 200 basis points to 14.5 per cent as well as the availability of a Ghs 3 billion syndicated loan facility to banks.
The Oxford Business Group argues in its report that, although government’s reform of the banking sector – the financial sector clean-up – fortified the sector, the industry faced several challenges after the onset of the pandemic with one of the challenges being the extra costs incurred in continuing operations while adhering to the social distancing measures.
The reduction in the reserve requirements of commercial banks from 10 per cent to 8 per cent coupled with the 1.5 percentage points reduction in the capital conservation buffer of banks, the Group notes, helped maintain liquidity in the country and made it easy for businesses to borrow.
The impact of the pandemic on Ghana’s financial sector, the Group further notes, was manageable in the first half of 2020 with two of the nation’s biggest banks – Ecobank Ghana and Ghana Commercial Bank – recording double-digit profit growth within H1 2020.
“However, the industry saw deposit growth slow from 7 per cent in May 2019 to 5.3 per cent in May 2020. The after-tax profit margin ratio for the sector fell to 5.4 per cent from 44.1 per cent in the same period a year before,” added the report.
The Oxford Business Group is of the view that, the banking sector will play a central role in Ghana’s economic recovery by providing loans to companies looking to rebuild or expand.
The Group applauded government for working with financial institutions to create structures that allow for easier collateral recovery and more official guarantees which would help banks provide more financing to Small and Medium Enterprises (SMEs).
