Businesses have paid some Ghs 15 billion out of their outstanding debts owed banks in the country.
The aforementioned amount represents almost 50 percent of what the banks were able to recover in 2020 debts owed. This is because in 2020 which was a covid year the banks were able to collect some Ghs 36 billion of debt owed by the business community.
Making the disclosure while delivering the keynote address at the Ghana National Chamber of Commerce & Industry CEO Business Forum, Governor of the Bank of Ghana (BoG), Dr Ernest Addison averred the debt pay down by businesses was surprisingly the private sector’s response to the Covid crisis despite regulatory reliefs and policies to boost lending to the private sector.
According to the Governor, aside reduced lending to businesses deemed risky by banks amid the pandemic, the substantial debt payment by businesses also contributed to the weak demand for credit and the subsequent slowed growth in credit recorded at 6.9 percent in April 2021 compared to the 17.9 percent credit growth recorded same period in April 2020.
“The COVID-related regulatory reliefs and policy measures have continued to support lending activities in the banking sector. However, in response to the crisis, there was substantial paying down of debt incurred before the crisis by the private sector. Due to weakened demand conditions, and the substantial pay down of debt (About GH¢36.0 billion in 2020 and GH¢15.0 billion during the first five months of 2021), annual growth in private sector credit was 6.9 percent as at April 2021, compared with 17.9 percent recorded in April 2020,” noted the Governor.
“It is however, expected that as the economic activity rebounds and lending rates drop further, private sector credit will pick up,” the Governor added.
Speaking on the theme Redefining Business Success: The Path for Business Value, Resilience and Sustainability, Dr Addison noted businesses in the country need to take action to develop resilient and innovative strategies to achieve long-term value and sustainability.
According to Dr Addison, building business resilience and sustainability is critical to the recovery process and businesses must recognise and anticipate the changing operating environment and develop strategies within the context of the changes to effectively allocate resources and create values to chart a path towards future growth.
“Businesses need to redefine strategies that would reposition them for future growth by adhering to good governance practices, efficiently deploying scarce capital, improving supply chains and finally, adopting technology-driven skills development and operations,” he opined.
Speaking further at the event, the Governor also called for a change in the ‘borrower behaviour’ of businesses.
“As policy makers we have focussed on policies that would improve access to finance for business sector but businesses will have to do their part to support policy efforts in the financial sector. The difficulties faced by banks to lend to private sector due to high non-performing loans must be resolved with a change in borrower behaviour and culture,” the Governor asserted.
