Ghana’s banking sector has strengthened its financial position over the past year, but high levels of non-performing loans (NPLs) continue to limit lending capacity and constrain the ability of banks to provide more credit to businesses, according to the Bank of Ghana (BoG).
The Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, said although banks have made significant progress in cleaning up their balance sheets, more work is needed to improve credit quality and create room for increased lending to support economic growth.
Speaking at the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana–Bank of Ghana Forum in Accra, Dr. Asiama said the decline in bad loans and stronger capital positions show that the banking sector has recovered significantly, but challenges remain.
According to the Governor, the industry’s NPL ratio declined to 16.1% at the end of June 2026, from more than 23% during the same period last year.
At the same time, the sector’s Capital Adequacy Ratio (CAR) stood at 20.4%, indicating that banks have maintained stronger capital buffers to absorb risks and support lending activities.
He said the improved capital position gives banks greater capacity to take carefully considered lending decisions.
“The industry’s non-performing loans ratio declined to 16.1 percent as at end-June this year, compared to over 23 percent a year ago, while the Capital Adequacy Ratio stood at 20.4 percent. Capital of that order is what gives a bank the room to take considered risks.”
However, Dr. Asiama cautioned that the improvement in the sector should not create a sense of complacency, noting that the current level of bad loans remains high.
“That is progress and not sufficiency, and 16.1 percent remains too high, even if it is fully provisioned.”
The Governor explained that reducing bad loans is important because high levels of non-performing loans tie up bank capital, increase recovery costs and limit the ability of financial institutions to extend fresh credit, particularly to smaller and higher-risk businesses.
“High non-performing loans tie up capital. They raise recovery costs and restrict new credit, more severely for smaller and higher-risk borrowers. So reducing them is therefore not merely a supervisory concern. It is part of Ghana’s development agenda.”
He said improving credit quality would allow banks to play a stronger role in supporting private sector growth and expanding access to finance.
The Bank of Ghana has directed all regulated financial institutions to reduce their NPL ratios to no more than 10% by the end of December 2026.
Dr. Asiama said banks would be expected to achieve this through stronger credit appraisal processes, board-approved strategies for reducing bad loans, improved loan recovery mechanisms and the write-off of fully provisioned exposures where there are no realistic prospects of recovery.
