African banks push­ing len­ders to cut pur­chases of govern­ment bonds

The Pak Banker - - Front Page -

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

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