Strong growth expected for Ghana’s banking sector in 2021

The banking sector in Ghana is expected to see significant growth in 2021, despite the challenges posed by the COVID-19 pandemic. The Bank of Ghana has reported a remarkable 18.5% year-on-year increase in total banking sector assets, reaching 152 billion cedis by the end of February this year. Suleymana Mohammed, Founder of Doobia, joined CNBC Africa to discuss the resilience and innovative strategies adopted by Ghanaian banks during the peak of the crisis. The COVID-19 pandemic presented unprecedented challenges for the global economy, with the financial sector being particularly hard-hit. However, Ghana's banking sector weathered the storm with commendable resilience. Mohammed highlighted that prior to the pandemic, banks in Ghana had undergone a recapitalization exercise, boosting their capital base and enabling them to navigate the crisis effectively. Despite facing uncertainties during the peak of the pandemic, the Bank of Ghana implemented measures to enhance liquidity in the financial system. These included reducing reserve requirements for banks to encourage lending and support businesses. While many businesses faced disruptions in cash flows and revenue losses, banks hesitated to increase lending to the private sector. Instead, they opted to invest in government securities, a lower-risk option during uncertain times. This strategic decision helped Ghanaian banks maintain stability and weather the economic uncertainties. Digital innovation played a crucial role in supporting banking operations during the pandemic. Ghanaian banks leveraged digital platforms and introduced innovative banking solutions to cater to customer needs. From online banking to agent banking, financial institutions embraced technology to provide seamless services to clients. Mohammed emphasized that the pandemic served as a wake-up call for the banking sector, prompting a shift towards digitalization as the new norm. Despite the challenges posed by the pandemic, the banking sector in Ghana remained profitable in 2020 and continued to show resilience in the first quarter of 2021. While profitability may have been lower compared to previous years, banks managed to navigate uncertainties and maintain their operations. However, there was a slight increase in the Non-Performing Loan (NPL) ratio, indicating the impact of economic disruptions on loan repayments. Ghanaian banks traditionally operate in sectors such as finance, services, oil, and gas. The oil and gas sector, in particular, has emerged as a key revenue generator for banks. However, sectors like construction faced challenges during the pandemic, leading to delays in payments and project disruptions. The construction sector, which relies heavily on government projects and contracts, experienced a slowdown in activities, impacting the revenue streams of banks operating in this segment. As Ghana's economy continues to recover from the effects of the pandemic, the banking sector is poised for growth and adaptation. With a renewed focus on digital innovation, risk management, and sector diversification, Ghanaian banks are gearing up to navigate the changing landscape and capitalize on emerging opportunities for sustainable growth.