African banks pushing lenders to cut purchases of government bonds
CAPETOWN: African central banks are pushing lenders to cut purchases of government bonds and instead lend more to local companies that are key to creating a functioning commercial economy.
Borrowing costs in some of sub-Saharan Africa's biggest economies have barely budged, even after central banks slashed interest rates.
Average lending rates at commercial banks in Kenya were little changed at 13.85 percent in October compared with 14.2 percent in January last year, even after the central bank cut its key rate to a record low of 6 percent.
Ghana's key rate of 13.5 percent compares with an average 28.5 percent banks charge.
Nigeria has capped lenders' purchases of treasury bills and Mauritius may do the same.
Africa's " top-tier corporate banks feel the risks are still too high," said Graham Stock, chief strategist at London-based Insparo Asset Management.
"Poor decision-making led much of the developed world's banking system into this crisis, so banks generally are right to be cautious." Spurring the commercial loan market would give industry funds in a region the International Monetary Fund expects to grow 5.5 percent in 2011, less than its 6.4 percent estimate for all developing nations. The main concern for African central bankers is inadequate lending may curb growth.
"What we haven't seen is commercial banks following the trend to the same extent," said first deputy governor of the Bank of Ghana, Kofi Wampah, in Accra.
The gap between bank interest rates and the central bank should be five or six percentage points. Because banks' funds are "trapped in treasury bills", it takes them months to follow the central bank in paring their rates, he said.
Banks say a lack of credit-profiling systems and legal consequences for those who default raise their caution. Sanjay Rughani, finance director at Standard Chartered Ghanaian unit, said advances since the start of 2010 to end-September were largely unchanged from last year at 500 million cedis (R2 427m).
The lender increased its holding of government debt to around 550m cedis this year from 300m cedis for the same period in 2009.
Kenya's central bank has taken steps to improve transparency, granting CRB Africa the country's first credit-rating agency licence in February.
Rates for average customers have remained high because banks are still seeing defaults on repayments, said Gideon Kariuki, chief executive officer of Co-operative Bank of Kenya, the country's fourth-biggest bank by assets. Cooperatives' net non-performing loans rose 25 percent to 2.9 billion shillings (R250m) in the year until December. -PB News
LAHORE: American Ambassador to Pakistan Cameron P. Muntar and his wife Dr. Marilyn White along with American Consul General Carmela Conroy, busy in breakfast at a local hotel in the provincial capital. -Online