The Bank of Ghana has reported a substantial increase in the submission of loan records to credit bureaux in 2023. According to the Central Bank’s 2023 Annual Credit Activity Report, an average of 21.2 million loan records were submitted monthly by data providers, reflecting a dramatic 455 percent rise compared to the 3.8 million records submitted monthly in 2022.
This remarkable surge in loan data submissions indicates a significant shift in the country’s credit landscape. Most notably, 99 percent of the records involved individual borrowers, underscoring a shift towards consumer lending. The increase is largely driven by the improved reporting of digital loan data to credit bureaux, as financial institutions increasingly adopt digital solutions to provide loans to individuals.
Among the financial institutions leading the charge in submitting individual loan data were savings and loan companies, along with finance houses. These institutions outperformed traditional banks and microfinance institutions in the volume of individual loan data submissions. However, in the business loan sector, banks continued to dominate, contributing 67.6 percent of all business-related loan submissions. This trend has been consistent over the past few years, highlighting the banks’ focus on maintaining their strong presence in the business loan segment.
The report also noted an interesting shift among rural banks and microfinance institutions. While these specialized deposit-taking institutions (SDIs) showed a notable increase in individual loan submissions, they reported a decline in business loan data. This shift suggests that SDIs are increasingly prioritizing payroll and digital loans over traditional business lending, reflecting a broader trend in the financial sector towards consumer-oriented services.
The rise in individual loan data submissions can also be attributed to the growth of digital lending platforms, which have made it easier for consumers to access credit. With the growing use of mobile and online platforms, many Ghanaians are now able to secure loans quickly and conveniently, contributing to the surge in consumer lending.
This shift towards digital loans has encouraged financial institutions to improve their reporting mechanisms, ensuring that loan data is accurately captured and submitted to credit bureaux.
As the volume of loan data submissions grows, the importance of accurate and timely credit reporting becomes increasingly vital. Credit bureaux play a crucial role in helping financial institutions assess the creditworthiness of borrowers, enabling them to make informed lending decisions.
With the significant increase in loan records being submitted, credit bureaux now have access to more comprehensive data, which can help to reduce the risks associated with lending and improve the overall efficiency of the credit market.
In addition to reporting on the increase in loan data submissions, the Bank of Ghana’s report also highlighted ongoing efforts to address the issue of dud cheques in the country. Dud cheques, or cheques that are dishonoured due to insufficient funds, have long been a problem in the Ghanaian financial system. These cheques not only disrupt business transactions but also damage the reputation of the individuals and businesses that issue them.
To combat this issue, the Bank of Ghana has intensified its public education campaigns, aimed at raising awareness about the serious consequences of issuing dud cheques. The campaign seeks to inform customers that issuing a dishonoured cheque can have severe repercussions, including negatively affecting their ability to secure future loans.
Offenders who issue dud cheques face stiff penalties. These include being barred from accessing credit or issuing cheques for up to three years, which can have a lasting impact on their financial standing. The Bank of Ghana’s public education initiative is part of a broader effort to promote responsible financial behaviour among consumers and businesses, while also ensuring the integrity of the financial system.
The Central Bank’s focus on improving credit reporting and addressing issues such as dud cheques reflects its commitment to fostering a more transparent and efficient financial system in Ghana.
By ensuring that loan data is accurately reported and that customers are aware of the consequences of issuing dud cheques, the Bank of Ghana aims to strengthen the country’s credit market and promote responsible lending practices.
The significant increase in loan data submissions in 2023 is a positive sign for the future of Ghana’s credit market. With more comprehensive data being submitted to credit bureaux, financial institutions will be better equipped to assess the creditworthiness of borrowers, ultimately leading to more responsible lending practices.
At the same time, the Bank of Ghana’s efforts to combat dud cheques and raise awareness about the importance of financial responsibility will help to create a more stable and trustworthy financial environment.
In conclusion, the Bank of Ghana’s 2023 Annual Credit Activity Report highlights the impressive growth in loan data submissions to credit bureaux, driven by a shift towards consumer lending and improved digital loan reporting. As financial institutions continue to adapt to the changing credit landscape, the importance of accurate credit reporting and responsible financial behaviour cannot be overstated.
The Central Bank’s efforts to address these issues will play a critical role in ensuring the continued growth and stability of Ghana’s financial system.
