It will be more difficult from now till the end of the year to secure loans from banks in Ghana.
This is according to a report from Ecobank research on the banking industry in Ghana.
Amid increasing interest rates on loans, the report indicates banks’ appetite for lending will weaken in the last quarter of 2014 in response to the weakening economy.
This means banks are likely to tighten lending for individuals, SMEs and corporate bodies.
According to Ecobank Research, the Bank of Ghana’s latest credit conditions survey agrees with the view that lending will be tightened.
The report indicates lending to small and medium sized enterprises and large corporate bodies, which in total accounted for 74% of total credit, at the close of 2013 will be affected the most.
The report also indicates demand for consumer lending is already weak, since ordinary households see the prevailing lending rates as prohibitive, and therefore consumer lending accounts for only 17% of total credit.
Banks are also becoming increasingly cautious with regard to consumer lending on account of increasing risk of default as the high cost of living continues to eat into households’ disposable income.
Ecobank Research says that if the key economic indicators underperform further in the last quarter through to the first quarter of 2015, then a number of corporate entities and SMEs will demand the restructuring and revision of the terms of the loans.
This is because lending rates have continued to rise, with industry base rates now ranging between 26% and 30% on local currency denominated loans and between 11-15% on foreign currency denominated loans.
The report also says banks are expected to face significant challenges in funding their balance sheets, especially in meeting foreign currency loan requests.
As a result of the expected general tightening in their loan books, it is expected that banks earnings growth rates will slowdown.
