Banks shift lending to businesses as treasury returns fall

Ghanaian banks are changing their lending strategy. They are moving away from investing in government bonds. This is because the money they earn from these bonds is now very low. Instead, banks are now lending more to businesses.

Farihan Alhassan, the Managing Director of GCB Bank, spoke about this. He said banks are now very careful about who they lend money to. They have strong checks to avoid bad loans like in the past. Banks now look closely at loan applications to predict future payment problems. If needed, they will change loan terms to help businesses pay back.

Mr. Alhassan explained that banks now only lend to sectors they understand well. Their lending decisions go through strict checks by a credit committee.

He also linked the current high level of bad loans to how the economy was managed before. Even though the economy is getting better, low interest rates bring new risks. The central bank is also pushing banks to lend to businesses. This means banks must be careful not to give loans that people cannot pay back. They need to find a balance.

The central bank has warned banks about high bad loan levels. Banks with too many bad loans will face consequences. This warning helps banks be more careful. It makes them pay attention to the quality of loans they give out. This includes loans to businesses in the real economy.

This shift helps good businesses get loans more easily. They might not have gotten loans before. And with lower interest rates, it is easier for them to pay back these loans.