The total amount of bank losses because of non-payment (non-performing) of loans have reached close to GH8 billion as at June this year, the latest Bank of Ghana Banking (BoG) sector report said, covering June 2016 – June 2017 being a total of 21.2% of all loans.
The report also brought up some interesting developments worth considering. Contrary to reports that government was the cause of these rising bad debts the report revealed otherwise as the private sector accounted for more than 90 percent of the debts.
According to the report “private sector, being the largest recipient of outstanding credit balances also accounted for the greater proportion of banks’ NPLs”.
The share of private sector NPLs in total debts increased from 87.3% in June 2016 to 94.9% in June 2017 while the proportion of banks’ NPLs attributable to the public sector declined from 12.7% to 5.1% over the same period. The report attributed it to the restructuring of the TOR and VRA debts accounted for the decline in the public sector’s share of NPLs during the review period.
Most private sector non-performing loans were debts of indigenous enterprises accounting for 77.2% of total NPLs in June 2017, from 73.0% in June 2016.
Non-performance is one of the factors that the cost of borrowing is extremely high in Ghana.
Although the banks tend to blame private sector non-performance they are the root cause of non-performing loans,
Where all developed and many developing countries have a central credit registration system in place, Ghanaian banks and the Bank of Ghana have never reached such a registration.
This results in many fraudulent attempts to get credit, with the same equities given out to several banks on loans resulting in many defaults to pay back loans, resulting in high costs of borrowing.