…Bank of Ghana, Ministry of Finance, banks, traders and industry
examine why cheaper money is reaching some borrowers faster than others
Lower interest rates are reaching borrowers of Ghana’s universal
banks faster than customers of community and microfinance banks, according to a
survey of banks presented at the third Post-Monetary Policy Committee
(Post-MPC) Policy Seminar of Chartered Institute of Bankers, Ghana (CIB Ghana).
The seminar, held at the CIB Ghana Auditorium and streamed on the
Institute’s social media platforms, brought together the Bank of Ghana (BoG),
the Ministry of Finance, banks, traders and industry. Discussions centered on
monetary policy transmission, credit growth and non-performing loans (NPLs).
It followed the 132nd meeting of the BoG’s Monetary Policy Committee (MPC),
which voted unanimously on 24 September to keep the policy rate unchanged at
14.0 percent.
Credit growth and credit quality must move together
Opening the seminar, the President of CIB Ghana Governing Council,
Dr. Mrs. Ellen Ohene-Afoakwa, FCIB, said monetary policy had implications
beyond economists and central bankers, as its effects were transmitted through
financial markets, lending conditions, businesses and households.
She said that the effectiveness of monetary policy depended not
only on changes in the policy rate but also on the extent to which those
changes were transmitted to the wider economy. “As an institute, we
recognise that credit growth and credit quality must move together,” she said.
She added that Ghana needed a banking sector capable of providing
adequate credit to productive sectors while maintaining strong risk management
and responsible lending practices. On NPLs, she said greater attention should
be placed on preventing bad loans than on recovering them after they had
deteriorated.
Central bank perspective
In remarks read on his behalf by the BoG’s Director of Research,
Dr. Simon Harvey, the Governor of the Bank of Ghana, Dr. Johnson P. Asiama,
said changes in the policy rate do not pass through to borrowers at once,
because banks also weigh funding costs, credit risk, operating costs and
expected losses when pricing loans.
“This transmission is neither automatic nor instantaneous,” the
Governor said.
He said the aim of monetary policy was not simply to achieve lower
interest rates but to maintain anchored inflation expectations, a stable
currency and sound financial institutions. He also called for a stronger focus
on preventing NPLs. “The objective is not simply to achieve lower interest
rates,” he said.
The Governor said the MPC found CIB Ghana’s Pre-MPC survey, which
is presented to the Committee ahead of each meeting, insightful, helpful and
complementary to its own analytical models.
Industry survey
The Chief Executive Officer of CIB Ghana, Mr. Robert Dzato, FCIB,
presented findings from the Institute’s September Pre-MPC sentiment survey,
which the CIB Ghana research team conducts among banks ahead of each MPC
meeting to gather industry insights to support the work of the MPC.
Mr. Dzato said the survey showed strong appetite among banks to
lend, although the impact of monetary policy transmission varied across market
segments. “We see appetite to lend is quite high,” he said, noting that “the
real impact of the transmission of monetary policy varies across the various
segments.”
Lending rates differed widely by type of bank. Most universal banks
surveyed reported lending at 10 to 15 percent. Among community banks, 46
percent reported lending at 21 to 25 percent, up from 36 percent in the July
survey, while microfinance banks reported rates of roughly 31 to 40 percent.
Other findings:
●
About 65 percent of respondents expressed
high confidence in the macroeconomic environment.
●
About 80 percent consider the
current policy stance effective in containing inflation.
●
86 percent of respondents expected
the MPC to hold the policy rate, as it did
●
70 percent expect inflation to rise over the
next three months.
●
71 percent of the banks are
confident of meeting the 10 percent NPL directive by the end of 2026.
Although most banks were confident about the wider economy, a
majority expected inflation to rise in the coming months, an upside risk that
also featured in the panel’s discussion of the MPC’s decision to hold. On asset
quality, he described banks’ confidence in meeting the NPL target of 10 percent
by year end, as encouraging but warned that faster credit growth had to be
matched by stronger monitoring, recovery and risk mitigation. “We are driving
credit growth for obvious reasons,” Mr. Dzato said, adding that loans that were
not repaid on time could create another problem for the sector.
Panel discussion
The panel was moderated by Mrs. Ellen Gyamera, ACIB, Head of the
Petroleum Fund at the BoG, and comprised Dr. Simon Harvey, Director of Research
of Bank of Ghana; Mr Frederick Amissah, a Technical Advisor to the Ministry of
Finance; Dr. Charles Atuahene, Executive Member of Finance and Administration
Committee of Association of Ghana Industries (AGI); Mr. John Awuah, Chief
Executive Officer of the Ghana Association of Banks and Mr. Clement Boateng, the President of the
Ghana Union of Traders Association (GUTA).
Dr. Harvey set out the basis for the MPC’s decision to hold the
policy rate, including upside risks to inflation. Mr. Amissah spoke on
coordination between fiscal and monetary authorities, and on the role of fiscal
discipline in keeping prices stable and bringing down government borrowing
costs.
Panellists noted that loan pricing had fallen from its past highs
and discussed the scope for further declines over time. Mr. Awuah addressed
access to credit, the documentation and record-keeping borrowers need to
qualify, and the role of collateral enforcement and the courts in recovering
bad loans, drawing comparisons with NPL levels elsewhere in the region.
Mr. Boateng called for repayment terms, including grace periods,
that reflect traders’ import cycles and shipping delays. Dr. Atuahene discussed
how exchange rate movements affect exporters’ competitiveness, input costs and
businesses’ appetite to borrow.
Institute update
Dr. Ohene-Afoakwa highlighted the Institute’s growth in
professional education, certification and ethics, including its Non-Interest
Banking Certification, Branch CEO Programme, digital and ESG certifications and
Ethics 2.0 class. She also noted Ghana’s success in winning the right to host
the World Conference of Banking Institutes in 2028. She also appealed for
support for the Institute’s planned modern bankers’ house and business complex,
describing the project as an investment in the future of the banking profession
and in building a stronger, more professional and future-ready financial
sector. The seminar forms part of events leading up to the annual Bankers Week.
