Private sector lending fastest in three years -number of agri loans fall

Private sector lending fastest in three years -number of agri loans fall – Half Year Report

Aug 29, 2019 News

Lending to the private sector for the first half of the year was the fastest in the last three years.

There has been marked improvement in the lending sector, according to the Ministry of Finance.

According to the Ministry of Finance’s half-year report, there was a decline in the first six months of lending to the agriculture sector.
There were also more loans for the purchase of vehicles, the report said.
At the end of the first half of 2019, net domestic credit of the banking system grew by 14.1 percent over the same period last year, to $33.4 billion, supported by an expansion in both private and public sector credit.
“Total credit to the private sector increased by 5.7 percent to $238.8 billion over the review period, faster than the past three years. This was supported by an expansion in loans and advances to individuals and businesses, except for businesses in the agriculture sector,” the report disclosed.
The Ministry explained that the decline in this sector, of 2.1 percent, to $13.1 billion resulted mainly from a contraction in lending for sugarcane and livestock production of 35.4 percent and 19.8 percent, to $0.9 billion and $1.4 billion, respectively.
However, in contrast, credit to all other sectors recorded growth.
“Credit to the mining and quarrying, manufacturing, and services sectors increased by 6 percent, 0.5 percent, and 7.2 percent, to $5.2 billion, $26.1 billion, and $70.5 billion, respectively. The increase in the mining and quarry sector was attributed solely to growth in lending to industries outside of the bauxite sub-sector, whereas the expansion in the manufacturing sector resulted from mixed outturns in the sub-categories.”
Significantly, there was a sizeable increase of $1.4 billion and $0.5 billion in the beverages, food and tobacco, and other construction and engineering sub-categories, which the Ministry explained was partially offset by a notable decline of $1.2 billion and $0.5 billion in lending to the other manufacturing and rice milling industries, respectively.
“The outturn in lending to the services subcategories, on the other hand, was mostly positive, with major contributors such as the “other services”, distribution, entertainment and catering, and education subcategories increasing by $2.2 billion, $1.7 billion, $0.8 billion and $0.7 billion, respectively.”
One area that would be speaking of confidence would be lending to households.
This area recorded robust growth of 13.5 percent, to reach $32 billion – stronger than the past two years, and was supported by an increase in loans and advances for all purposes, with the exception of other durable goods and travel.
“Moreover, lending for housing, motor cars and other purposes expanded by $1.4 billion, $1.3 billion and $1.1 billion, respectively. Of the other major categories of credit, which include real estate mortgages, credit instruments and “other credit”, only the former two increased, by 5.7 percent and 2.8 percent, to $84.5 billion and $3.1 billion, respectively.”
As expected, there was an expansion in real estate mortgages, which surpassed the half-year growth rate in each of the past three years, resulting from an increase in lending of 5 percent and 14.7 percent for private dwellings, and industrial and commercial properties, respectively. “Further, growth in credit instruments was solely supported by increased lending for credit cards, while the decline in the “other credit” category of 8.5 percent to $4.1 billion, resulted from a contraction of 8.4 percent and 10.7 percent in securities, and shares and other equity, respectively.”
Total liquid assets of the commercial banks expanded by 6.2 percent to $127.7 billion.
Total reserves deposited with the Bank of Guyana were $75.3 billion, 0.7 percent higher than the level at the end of June 2018.
“The required statutory reserves of the commercial banks were $48.2 billion at the end of June 2019, creating an excess over the minimum requirement of $27.1 billion.” The news of the performance would not be totally unexpected with increased activities in the oil and gas arena ahead of first oil.