The Bank of Ghana (BoG) has approved guarantees from state-backed institutions such as the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) and the Development Bank Ghana (DBG) to be treated as acceptable collateral.
The move is expected to ease lending constraints, strengthen the banking sector, and support government’s 24-hour economy programme.
Dr. Johnson Pandit Asiama, Governor of the BoG, in remarks delivered on his behalf by Ismail Adam, Director of Banking Supervision, said the new framework is designed to de-risk agricultural lending while boosting private sector financing.
“The idea was to encourage financial institutions to increase their exposure to the real sector through credit guarantee schemes,” Mr. Adam explained at a banking roundtable in Accra. “Going forward, the same protocol will be extended to DBG.”
Under the new framework, GIRSAL provides up to 70 percent cash-backed credit risk coverage on agricultural loans with a zero-percent risk weight from the central bank.
DBG also operates a US$70 million partial credit guarantee scheme to support financial institutions in managing default risks across agriculture, manufacturing, services, and SMEs, with a special emphasis on women-led and first-time borrowers.
John Awuah, Chief Executive Officer of the Ghana Association of Banks, said the policy will significantly alter how banks manage lending limits and credit risk.
“If a loan is unsecured, a bank can lend up to 10 percent of its net owned funds. But if it is secured with a guarantee accepted by the BoG, the limit rises to 25 percent,” he explained “Instead of giving GH¢10 million, I can now lend GH¢25 million, allowing businesses to do much more.”
He added that the approach also reduces the impact on banks’ regulatory capital since guarantee-backed exposures consume less capital.
Mr. Awuah said credit guarantees provide a critical foundation for financing the government’s proposed 24-hour economy, which seeks to expand production and services beyond traditional hours to boost growth and job creation.
“Sometimes in other jurisdictions, guarantees are even netted off exposures on the books, freeing up capacity to lend more,” he said. “As bankers, we are very keen to be the oil that fuels the programme. But it takes two to tango, the private sector must also come on board.”
He cautioned, however, that long-term, affordable funding remains a major constraint. Institutions like DBG, he said, were established to fill that gap and provide banks with resources to extend loans with longer maturities at sustainable rates.
“The more long-term arrangements we have, the better it is for both banks and borrowers,” Mr. Awuah stressed. “This allows businesses to scale, repay comfortably, and ultimately strengthens the financial system.”
