Banks Tightening Credit Condition's

Salim Yakubu Fari
Assessments carried out by Bank of Ghana (BOG) indicated that Banks continued to tightening credit conditions for long terms loans 65.06%, up from 64.20% in August.Net tightening of short term loans however remained unchanged at 55.0 percent.
Bank’s credit condition continues to point to tightening of credit to both enterprises and households. Small and Medium Enterprises (SME’s) access to credit was tightened marginally while access by large enterprises remained unchanged
In an interview with some bankers at the Bank of Ghana (BOG) they stated that as regards loan maturities, long term credits continued to be tightened while stance on short term credit remained unchanged. On price terms and conditions such as shortening of the maturity of loans of credit lines, and the requirement of additional loan covenants and collaterals continued to be employed to tighten credit stance.
In the two months ended October 2009, banks reporting net tightening of credit to enterprises moved up from 72.51% in the August 2009 survey to 72.63% in the survey of October 2009.
According to some bankers at the Stanbic bank Ghana Limited who spoke to Business Day said the Cost of Funds and expectations regarding economic activities Continued to be the most important factors cited by lenders for the tightening of credit stance.
“Risk relating to current performance of the Deposit Money Banks (DMBs) fifty largest borrowers also contributed to net tightening of credit stance competition from other banks did not result in easing of credit at October survey rebound”.
Credit stance was tightened through increases in margins on average loans to 56.22% from 55.23% and on riskier loans to 57.21% from 56.54%.
Non-prices terms and conditions, and a shortening of maturity of loans or credits lines, and the requirement of more loan contributed to the tightening of credit stance for two months ended October 2009.
Credit availability to small and medium sized enterprises also continued to be tightened.Net demand for loans by enterprises increased marginally in two months ended October 2009.Overall loan demand was 14.20% compared with 13.38% in August survey
According to the respondent Bank’s, the increased in demand for credit was mainly for inventories and working capital, and In terms of borrower size, large enterprises demand for credit inched up while small medium sized companies remain unchanged.