Commercial banks’ lending has reportedly plunged in Liberia as combined international and local efforts to contain the Ebola detailed gains in the fight against the virus. Banks are among the highest local donors to the fight against the Ebola epidemic.
They have contributed huge cash and kinds including ambulances and anti-Ebola materials to not only the government, but to communities and homes, as an industry. But the sector is reportedly feeling the pinch of the Ebola outbreak with some key players in the industry hinting at the need for an Ebola post-crisis support to the sector to fulfill its key role of financial intermediary.
“We [banks] have reviewed our lending processes because several sectors of the economy have been badly hit due to the Ebola virus,” said Liberia Bankers’ Association (LBA) president, Mr. John B. S. Davies, III.
In a recent interview with our Business Desk, Mr. Davies spoke of ongoing efforts by the Central Bank of Liberia (CBL) and the government of Liberia’s Economic Management Team (EMT) to conduct an impact assessment analysis of the Ebola crisis.
“They are going to come up with a report and action would be taken in the interest of the banks,” he said.
But stronger networking and dialogue is needed between the banks and the government to design the best solution for post-Ebola economic recovery strategy in order to revive the economy.
“We want this crisis to be addressed from the macroeconomic standpoint in order to jumpstart the economy whether in the form of a fiscal relief for banks going forward. We believe that Liberia has the best intelligentsia at the fiscal and monetary levels to deal with this issue,” the LBA boss added.
Most banks are said to be leaning towards fiscal relief to recover their losses as operating costs grow, even though all of the nine banks are financially sound and far from any threat of collapse. Industry insiders are saying that they are pushing for a post-Ebola crisis support in order to position themselves to help restart the economy through lending after the containment of the virus.
“We are required by the monetary authority to keep all of our branches across the country open, even at loss. What we [banks] are experiencing is that more and more customers are withdrawing then depositing,” a bank manager, who asked not be named, said.
There are nine licensed banks in Liberia and they combine have about 88 branches across the country.
“We have put a halt to lending for now because of the high risks involved,” the anonymous bank manager further said.
This manager also disclosed that the banking industry already had low profitability problem prior to the Ebola outbreak.
The Central Bank Liberia (CBL) blamed this problem to the industry’s overall poor asset quality and non-performing loans (NPLs). Apart from Liberia, the Ebola epidemic in West Africa has created heavy toll on other countries within the region.
The region’s key growth sectors, including agriculture and services have been affected as the Ebola virus force farmers to abandon their farms and flee elsewhere for safety.
Rice and other cash crop farmers complain of poor harvest due to limited bank investment in the sectors as the Ebola outbreak rages in the region since the first quarter of 2014.
With limited access to finance prior to the Ebola crisis, farmers and other businesses are facing the challenge of finding a way to restart their farms and businesses after the Ebola crisis.
To most of the people, Ebola has not only undermined the financial institutions, the virus outbreak has dealt huge blows to macroeconomic stability of the country as it weakens banks’ ability to make needed lending available to spur economic growth and development.
The LBA president, who is currently in the United States, disclosed that banks have reviewed their lending processes because several sectors of the economy have been badly hit especially the hospitality and entertainment sectors.
Mr. Davies, who is also chief executive officer of the Liberian Bank for Development and Investment (LBDI), noted that extra costs on banks are posing serious challenges to their ability to lend money.
“Banks didn’t budget to fight the Ebola virus because no one knew Ebola would have come to Liberia. Sanitation and health related expenses are cost intensive and they dig deep into the banks’ profitability.”