The Effects of Covid-19 on Macroeconomic Variables and the Performance of the Banking Sector in Ghana

Abdul-Mumin Abdulai; Sulemana Mahawiya; Prince Charles Of ori

doi:10.36948/ijfmr.2023.v05i03.4101

The Effects of Covid-19 on Macroeconomic Variables and the Performance of the Banking Sector in Ghana

Author(s)	Abdul-Mumin Abdulai, Sulemana Mahawiya, Prince Charles Of ori
Country	Ghana
Abstract	The Banking industry of any economy plays a key role in inducing socioeconomic growth through its financial intermediation activities. Banks channel resources to productive areas that are fundamental to the progress of an economy. However, the emergence of COVID-19 since 2019 has left behind some worrying signals on the performances of both the real sectors and the financial sectors of many economies, particularly in Africa. Several lockdowns were experienced around the world including Ghana, which affected economic activities and performance of the banking industry. The objective of this study is to examine the effects of COVID-19 on the banking sector performance in Ghana. Two econometric techniques were used; namely, the pooled regression and the seemingly unrelated regression (SURE) techniques. The study employed two performance indicators; namely, Return on Asset (ROA) and Net Interest Margin (NIM) in order to check the robustness of the results. The aim of using SURE was to examine the objective of the study on bank-by-bank basis since there could be contemporaneous effects among the banks. The study considered the performances of ten banks for the period 2008-2020. This study used secondary data obtained from the financial statements of the sampled banks for the financial period from 2008 to 2020. The pooled results indicated that COVID-19 robustly reduced banking sector performance. Both the ROA and NIM results confirmed the negative effects of COVID-19 on the banking sector performance. For the macroeconomic variables, the result revealed that inflation exerted adverse effect on the performance of the banking sector whiles government expenditure and GDP per capita showed statistically significant positive impact on the operations of the banking sector. Bank size as bank specific factor has statistically significant positive effect on the operations of the banks. Similarly, interest rate even though reveals positive effect was statistically insignificant. On policy implication, the study recommends that there should be effective implementation of the necessary preventive and curative measures against COVID-19 and related pandemics, particularly the vaccination program. Also, the adoption of appropriate macroeconomic policy mix that has the potential of inducing economic growth becomes necessary. This could be the use of both expansionary fiscal and monetary policies. These policies will boost banking sector activities through general increase in savings, investment and economic activities.
Keywords	Effects, Macroeconomic variables, Performance, Banking Sector
Published In	Volume 5, Issue 3, May-June 2023
Published On	2023-06-30
Cite This	The Effects of Covid-19 on Macroeconomic Variables and the Performance of the Banking Sector in Ghana - Abdul-Mumin Abdulai, Sulemana Mahawiya, Prince Charles Of ori - IJFMR Volume 5, Issue 3, May-June 2023. DOI 10.36948/ijfmr.2023.v05i03.4101
DOI	https://doi.org/10.36948/ijfmr.2023.v05i03.4101
Short DOI	https://doi.org/gsfhkg

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The Effects of Covid-19 on Macroeconomic Variables and the Performance of the Banking Sector in Ghana

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