Ghana’s vulnerable and fragile indigenous banks, whether state or privately-owned, have been described as a situation that mirrors a national problem.
This is the observation of Dr. Kwabena Donkor, a former Minister of Power, who believes the troubles facing Ghana’s indigenous banks are not isolated; they reflect a broader national habit of managing local institutions with less urgency, less skill, and less forward planning.
Whether owned by the state or local private actors, many banks, he argues, were operated with a worrying level of comfort and complacency.
In an exclusive interview with The High Street Journal, the former Member of Parliament for Pru East lamented that, “The banking sector is symptomatic of our national malaise. When we say a thing is Ghanaian, we manage it with less intensity, with less passion, with less knowledge, and we run it to the ground.”
He is therefore making a strong case for why there is a need for a significant and total overhaul of how these indigenous banks conduct business, especially post the Domestic Debt Exchange Programme (DDEP).
Post-DDEP: How Comfort Turned Into Vulnerability
Dr. Kwabena Donkor recounts that before the Domestic Debt Exchange Programme (DDEP), many indigenous banks relied heavily on government bonds to make easy profits. Instead of developing strong lending systems, improving risk assessment, or pushing for efficient collections, they chose the safest and simplest path, which was placing their money in government securities and “living comfortably.”
So when the DDEP hit and the government restructured its debt, these banks suffered the deepest cuts. “They haemorrhaged,” Dr. Donkor said, noting that the institutions that had not built resilience were the first to stumble.
“Indigenous banks, whether state-owned or privately owned, were worse affected because they had not built resilience into the institutions. There was a lot of laziness in the practice of banking, especially by the state and the indigenous private sector, where it was easier to just buy government bonds, to hold government bonds, et cetera. They made their return, and they lived comfortably,” he noted.
He added, “And so when DDEP came, they haemorrhaged. They lost so much blood, literally. They were the most hit.”
Why Foreign Banks Survived the Shock
A striking point he raises is that none of the Nigerian-owned banks operating in Ghana was affected in the manner local ones were hit during the DDEP crisis. He says it wasn’t mainly because they had big parent companies abroad. It was because they had built the necessary buffers, better risk controls, stronger structures, and a more disciplined credit culture.
In contrast, many local banks had weak internal systems and carried huge volumes of unpaid loans that were never chased. This created cracks that widened quickly when the shock came.
He recounted, “Our Nigerian-owned banks in Ghana, none of them went under. And it was not just because there was the mother company’s support from Nigeria. No, it was because they had built resilience.”
Poor Loan Culture Fueling NPLs
One of the biggest weaknesses, according to Dr. Donkor, is the massive stock of non-performing loans (NPLs) among indigenous banks. Many of these bad loans came from political influence, poor due diligence, and the habit of lending to connected individuals and companies without serious checks.
He describes a culture where banks were too relaxed, granting facilities because of political ties, assuming government-backed projects could never fail, and overlooking basic commercial principles.
After the DDEP, these weaknesses have become even more obvious.
“If you look at the non-performing loan portfolio of our indigenous banks, and BOG has been on it, Bank of Ghana has been on it in recent times. They are so huge. We did not create a culture of chasing people to honour their obligations,” Dr. Donkor lamented.
A System in Crisis and an Urgent Call for Change
Dr. Donkor states clearly that the indigenous banking sector is in crisis. But it is also an opportunity and a moment to reset outdated practices. He makes a strong case for the culture of convenience to be replaced with a culture of discipline.
Banks, he says, must toughen up, enforce repayments, and focus on real commercial value rather than connections. “We are in a crisis in the banking sector”, he says, especially within the indigenous, state-owned, or privately owned. “There has to be a cultural change,” he insists.
He calls for a complete shift in mindset and business strategy. Banks must evaluate loans based strictly on merit, not politics, adding that they must pursue borrowers to honour their payments.
In addition, he pushes for facilities to be tied to proper project analysis, not assumptions of safety.
For him, the belief that “government projects cannot fail” must be abandoned. Indigenous banks must build resilience, strong risk systems, diversified portfolios, and tighter controls.
The Bottomline
Dr. Donkor is forceful that managers of locally-owned banks must treat banking as business, not charity, not favour-giving, and not political patronage.
He is convinced that if local banks adopt a disciplined commercial approach, they will not only recover from the DDEP shock but also stand firm against future uncertainties.
