Despite the robust profitability margins recorded by Ghanaian banks in 2025, there is the concern of rising levels of bad debts, widely known as Non-Performing Loans (NPLs) forcing the Central Bank (BoG) to act decisively.
In the midst of a supportive macroeconomic recovery, the banking industry’s asset quality has taken a severe hit, with the NPL ratio spiking from 18% in 2024 to a staggering 25% in 2025
In response to the development, the BoG has decided to swing its regulatory hammer, instituting some of the strictest supervisory measures the industry has seen in recent history. These measures are aimed at forcing commercial banks to clean up their portfolios.
The GHS 26 Billion Albatross
The latest PwC Ghana Banking Sector report reveals that the numbers behind the bad loans are eye-watering. Impaired loans ballooned by 68% to reach GHS 26.0 billion in 2025, heavily outpacing a 24% growth in gross loans and advances.
A key culprit remains the construction sector, where borrowers continue to face severe liquidity constraints in servicing their debts. This is heavily linked to what Dr. Philip Oti-Mensah, CEO of Universal Merchant Bank, describes as the sovereign payment bottleneck.
Dr. Oti-Mensah flags that many bank assets are tied directly to government projects, only for a new administration to assume power and declare it cannot pay, immediately crippling loan recoveries.
A Hit Where It Hurts
To halt this asset decay, the Bank of Ghana has drawn a line in the sand by establishing a 10% prudential NPL limit. For any bank breaching this 10% ceiling, the central bank’s sanction is swift strict restrictions on paying out dividends to shareholders, freezing bonuses, and capping future loan growth.
This effectively forces bank executives and boards to align their risk appetite with their own pockets.
Furthermore, the BoG has issued direct mandates ordering banks to write off fully provisioned loans that have no realistic recovery prospects and to restructure qualifying NPLs in an aggressive effort to purge bad debt from their books once and for all.
The Paradox of Protected Profits
In a surprising twist, this massive bad loan spike has not yet triggered a disaster for bank profitability. In fact, net impairment losses across the sector actually plummeted by 75.9%, falling from GHS 3.5 billion in 2024 to just GHS 841 million in 2025.
This paradox exists because the affected facilities were adequately collateralised and fully provisioned beforehand, insulating banks from immediate credit losses. However, relying on collateral-backed defaults is a risky and slow game
The Slow Wheel of Justice
A major structural challenge is the sluggish pace of debt recovery through the courts. John Awuah, CEO of the Ghana Association of Banks, points out a critical bottleneck within the credit ecosystem: the judiciary.
“We need the judiciary to work efficiently and recognise that recovery matters,” Awuah noted, explaining that banks can spend “years in court trying to recover a loan,” which directly inflates the risk premium and raises the cost of borrowing for all other honest businesses.
Addressing this will require coordinated action among financial institutions, regulators, policymakers, and the judiciary to strengthen credit discipline.
The New Era of Discipline
The era of easy interest margins is rapidly coming to an end. As Treasury bill yields slide and lending rates recede, banks can no longer afford to carry non-performing assets on their books. Furthermore, a uniform 20% Cash Reserve Ratio (CRR) instituted by the BoG will restrict the volume of deployable earning assets.
To survive and thrive in this low-interest environment, bank leaders must heed the advice of PwC Financial Services Leader Kingsford Arthur that banks must focus “not simply to grow, but to grow sustainably.”
