In the third quarter of 2024, the total value of secured loans distributed by banks and Specialised Deposit-Taking Institutions (SDIs) rose to GHȼ5.6 billion, marking a slight 2.8 percent increase compared to the GHȼ5.5 billion reported in the corresponding quarter of 2023. This positive trajectory in loan distribution is evidenced by recent data collected from the collateral registry of the Bank of Ghana (BoG), showcasing the ongoing growth in the financial sector despite fluctuating contributions from different lending institutions. However, a deeper analysis reveals varying trends between banks and SDIs within this period that could have significant implications for financial dynamics moving forward.
Breaking down the figures, banks contributed GHȼ3.5 billion to the total secured loans in the third quarter of 2024. This figure reflects a substantial decline of 18.7 percent from the GHȼ4.3 billion secured in the previous year’s third quarter. This decrease is a critical indicator of potential shifts in lending practices or market conditions affecting traditional banking operations. Conversely, SDIs exhibited remarkable growth, recording GHȼ2.1 billion in secured loans, a notable increase of 75 percent compared to GHȼ1.2 billion in Q3 of 2023. This dichotomy illustrates a potential shift in consumer preference towards less traditional lending avenues, signaling a possible transformation in the overall lending landscape within the country.
In terms of secured loan distribution, banks maintained the largest share at 62.3 percent in Q3 2024, down from 78.8 percent a year earlier. This decline demonstrates a significant retreat in their dominance in the secured loan market. In contrast, Savings and Loans Companies markedly increased their share from 12.7 percent to 23.4 percent in the same timeframe, highlighting a growing reliance on these institutions. Similarly, Rural and Community Banks also gained ground, with their share rising from 5.3 percent to 10.2 percent. This trend may suggest that borrowers are increasingly seeking more tailored financial products offered by these specialized institutions, making them substantial players in the secured lending arena.
Microfinance Institutions, while still a smaller player, also showed positive movement, increasing their share of secured loans to 2.2 percent from 1.7 percent. On the other hand, Finance Houses experienced a marginal decline, with their share dropping from 0.5 percent to 0.3 percent. This shift in the distribution of secured loans suggests a diversification of the borrowing landscape, as consumers may now favor lending institutions that offer more flexible terms and tailored services, reflecting changing customer expectations in the financial market.
Interestingly, the cumulative share of secured loans from other lending institutions rose to 1.6 percent from 1.0 percent year-on-year. This growth among smaller lenders further supports the notion of evolving preferences in the lending market, where clients gravitate towards institutions perceived to provide a more customer-centric approach as opposed to more conventional banks, which may present stricter lending criteria and less personalized services.
In conclusion, the overall increase in secured loans in the third quarter of 2024 underscores a dynamic shift within the lending market in Ghana. While the banking sector grapples with reduced contributions to secured lending, the remarkable rise in SDIs and other financial institutions indicates a potential transformation in how borrowers choose to finance their needs. The data emphasizes the growing significance of alternative lending sources and suggests a need for traditional banks to rethink their strategies to regain market share and better meet the evolving demands of consumers in this competitive environment.
