Credit or loans to businesses and households contracted by 7.44 percentage points year-on-year from end-December 2019 to end-December 2020.
This is according to the Quarterly Statistical Bulletin for Q4 2020 issued by the Bank of Ghana.
In percentage terms, credit to the private sector at the end of 2020, stood at 10.59 percent. A significant decline from the 18.03 percent recorded at the end of 2019.
The decline in credit to the private sector is not surprising, as risks to credit from banks were heightened due to the adverse impacts of the Covid-19 pandemic on businesses, households and the general economy.
Witnessed reduction in credit growth for the period under review was occasioned by reduced lending to risky households and businesses, particularly those operating in the sectors badly hit by the pandemic.
According to the Central Bank’s March 2021 Banking Sector Development Report, the slowdown in credit growth in 2020 was further supported by reduced credit demand by businesses and households possibly for fear of defaulting.
With a slowdown in credit demand by the private sector and reduction in lending to risky business in the country, banks resorted to shoring up their holdings of government securities which presents less risks to credit, thereby increasing significantly their assets in 2020.
According to the BoG, total assets value of banks over the course of 2020 and in the first two months of 2021 surged to Ghs 152 billion.
The recorded total assets value the BoG notes in its Banking Sector Development Report, represents a 18.5 percent year-on-year growth which is marginally higher than the annual growth of 17.8 percent as at end-February 2020.
According to the Central Bank, the witnessed higher growth in total assets for end-February 2021, reflects similar stronger growth in domestic and foreign assets of 19.1 percent and 11.1 percent when compared to the respective rates of 18.7 percent and 8.2 percent at end-February 2020.
“Investments shot up by 45.9 percent to GH¢67.9 billion, compared to the growth of 7.2 percent in the prior year. Accordingly, the share of investments in total assets scaled up further from 36.3 percent to 44.7 percent over the review period,” stated BoG.
