Agric sector tops all in lending to private sector

The Agric sector of the economy received more credit facilities from the commercial banks than any other sector as of the end of the February this year, the Governor of Bank of Ghana has said.

This is the first time that the agric sector, which contributes more than 40 percent to GDP, has received more credit than any other sector - and this follows consistent pronouncements by government to make agriculture the focus to grow the economy.

For the first two months of this year, the flow of commercial banks credit to the private sector totalled GH¢0.7 billion, representing a 13.9 percent increase compared to the same period last year

The Monetary Policy Committee (MPC) meeting of the Bank of Ghana has reported that the agric sector received 20.2 percent the credit flow to the private sector, followed closely by the electricity, gas and water sectors which absorbed 18.8 percent.

The manufacturing sector got 16.9 percent while import trade and construction had 16.5 and 15.4 percent respectively.

However, real credit extended by the commercial banks to the private sector declined by 0.3 percent in the period under consideration compared to growth of 22.5 percent recorded in the same period last year.

Outstanding commercial bank credit to the private sector in the first two months of the year was GH¢5.7 billion as against GH¢5.1 billion last year.

The Governor of Bank of Ghana, Kwesi Bekoe Amissah-Arthur who chairs the MPC meeting, said a survey of credit conditions conducted by the Central Bank last month continued to show a general tightening of credit to enterprises and households for mortgages in the first quarter of the year.

“There are additional declines in net demand for long-term credit. The cost of funds and increase in adversely classified loans contributed to the net tightening of credit,” he said.

He added that non-price terms and conditions, such as shortening of the maturity of loans and the requirement of additional loan covenants and collaterals, were employed by the commercial banks to tighten their credit stance in the first quarter of 2010.

Source:B&FT