Banks express worry over high loan default rate
Banks in Ghana have expressed worries that the high loan default rate could impact negatively on fresh credit extension going into next year.
Most firms are struggling to repay their loans due to the negative impact of Covid-19 on their operations, their feasible development can also affect the cost of credit going into next year.
However, the Chief Executive Officer of the Ghana Association of Bankers, John Awuah, has indicated that, it might be too early to make such assumptions and conclusion.
He noted that the it was an expectation that the Covid-19 risk factor would have been involved in the sanction and risk management criteria in order that every pricing will be based on potential risks associated with the pandemic.
“The expectation is that the risk introduced by covid, would have been factored into the sanction and risk management criteria. So if we are pricing, the pricing will take care of potential risk associated with them”, he said.
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He added that the risk team have also designed their parameters to include potential risk associated with covid-19, adding that he believes that when the banks want to give out loans, even to a customer who has not defaulted in repaying the loan, there could be a possibility that things might not go as a plan. That possibility is a risk and might be a certain likelihood that it can materialise.
He furthered that, with such possibility, banks need to operate with both eyes and ears open in order to make sure that the new credit on the balance sheet must have the right character for repayment.
“The risk team in the various grounds have now also designed their parameters to include risk associated or potentially associated with covid. So whiles I cannot say yes or no, what I believe is whatever loan, even if you give your customer who has never defaulted, there is a possibility that things may no go well.
“That possibility is a risk and with that risk, there is a certain likelihood that it may materialise and that is why at all times, you need to operate with both eyes open and ear open and ensure that the new credit that is been assumed on the balance sheet have the right character for repayment”, he stated.
