The latest figures from the Bank of Ghana’s financial stability report has shown that demand for credit by large enterprises declined in net terms during the survey round, resulting in a decline in the overall enterprise demand for credit.

The Report said demand for credit by small and medium enterprises, however, increased in net terms.

“This is because, SMEs, unlike large enterprises, do not have enough capital buffer and, hence, tend to rely largely on loans to smoothen their capital levels by being consistent in their credit demand in order to remain in business.

“The decrease in the overall enterprise demand for credit was largely on account of a sharp drop in enterprise demand for credit for inventories and working capital,” the Report added.

However, as far as loan demand for households is concerned, the survey round reported an increase in households’ demand for loans for house purchase and consumer credit. “This increase in loan demand by households was to smoothen households’ consumption over the period.”

As far as credit conditions are concerned, the Report revealed that banks’ lending conditions showed an ease in banks’ overall credit stance to enterprises in September 2015 relative to the June 2015 stance.

The ease in banks’ credit stance applied to both SMEs and large enterprises and also on both long-term and short-term loans, the Report added.

This stance was largely driven by improved expectations regarding the general economic environment due to the relative stability in the exchange rate and inflation and the ongoing fiscal consolidation.

Banks achieved the relative ease in the credit stance by easing the margin on riskier loans and also security and collateral requirements. However, the rise in non-interest loan cost moderated the eased stance to enterprises, the Report noted.

As far as loans or credit lines to households were concerned, the report said similarly, “the banks reported during this survey round, a relative ease in loans to households for house purchase and consumer credit and this translated into an overall ease in banks’ credit to households".

The stance, according to the report, was achieved through an ease in non-interest loan cost and an improvement in the maximum allowable size of loans to households. Banks, however, tightened their stance on riskier loans and also security and collateral requirements for households.