Per the September 2023 Monetary Policy Committee (MPC) report issued by the Bank of Ghana, outstanding credit extended to the private sector at the close of August 2023, stood at GH¢65,998.88 million.
This compares to the GH¢59,648.67 million recorded for the same corresponding period in the preceding year, August 2022.
The report further reveals that Deposit Money Banks have displayed notable shifts in their lending patterns, with credit to the private sector and public institutions experiencing an increment of GH¢6,328.50 million, translating to a 9.6% growth in August 2023, in stark contrast to the GH¢17,229.23 million (35.3%) growth recorded during the same period in the prior year, August 2022.
Specifically, credit to the private sector escalated by GH¢6,350.21 million in August 2023, marking a 10.7% year-on-year increase, compared to GH¢15,711.79 million (35.8% year-on-year) recorded in the corresponding period of 2022.
This discernible slowdown in nominal growth within the private sector credit domain is attributed, in part, to banks’ risk aversion. The banking sector’s inclination toward managing risk underscores the complexities currently characterizing the financing environment for Ghana’s private sector.
Per the report, real private sector credit growth has consistently underperformed relative to long-term expectations, underscoring the challenges faced by Ghana’s private sector in accessing vital financial resources.
The flow of credit to the private sector, the report notes, exhibits a marked concentration in five key sectors which are import trade; services; manufacturing; mining and quarrying; and transport, storage, and communication.
As stakeholders and policymakers take heed of this credit stagnation, the focus now shifts to potential strategies that can effectively reinvigorate private sector lending, breathing new life into the country’s vital economic engine. The nation’s business community awaits solutions that can navigate these challenges and pave the way for renewed economic momentum.