Loan defaults remain one of the biggest challenges confronting Ghana’s banking and financial sector.

The rising volume of non-performing loans (NPLs) has not only weakened the balance sheets of banks but also driven up lending rates, leaving many businesses—particularly small and medium-sized enterprises (SMEs)—struggling to access affordable credit. To address this persistent problem, the Association of Ghana Industries (AGI) is calling for the establishment of credit reference bureaus and a collateral registry as crucial tools to restore discipline in the lending ecosystem.

Speaking at a panel discussion during the opening of National ICT Week, the Chief Executive Officer of AGI, Mr. Seth Twum-Akwaboah, underscored the urgent need to strengthen credit risk management in Ghana’s banking industry. According to him, the creation of robust credit bureaus and a centralized collateral registry would enable banks to better track borrowers’ repayment history and ensure greater transparency in lending.

“You may be a performing enterprise but once you go to a bank for a loan, they are looking at the whole ecosystem. What percentage of my portfolio has gone out that I didn’t recover? So I must recover it through those of you who are paying. They increase the interest rate to cover that because the Bank of Ghana requires them to cover all the loans they give out.”
Mr. Seth Twum-Akwaboah

He stressed that loan defaults by some borrowers unfairly drive up the cost of capital for compliant businesses. A credit bureau and collateral registry, he argued, would ensure that individual borrowers are held accountable for their repayment behavior without punishing the wider business community with higher interest rates.

The Cost of Capital and Its Ripple Effect

High interest rates have long been a thorn in the flesh of Ghanaian businesses, especially SMEs that serve as the backbone of the economy. Many businesses cite the prohibitive cost of borrowing as a major barrier to expansion and long-term investment.

Currently, banks often raise their lending rates to cushion themselves against losses from non-performing loans. This, however, creates a vicious cycle where compliant borrowers are forced to shoulder the burden of defaulters. Mr. Twum-Akwaboah noted that breaking this cycle requires systemic reforms that embed accountability into the credit system.

The AGI CEO also emphasized the role of digitalization in transforming Ghana’s financial sector. He pointed out that integrating digital tools into lending frameworks could significantly reduce defaults by enhancing transparency and tracking repayment obligations.

“Digitalization can help solve some of these problems. Introduce the credit reference bureau and the collateral registry. These are all mechanisms for helping to improve transparency and ensuring that we can track individuals.”
Mr. Twum-Akwaboah

Mr. Twum-Akwaboah further urged SMEs to adopt digital systems in their operations to improve efficiency and scalability. By embracing digitalization, businesses not only strengthen their own capacity but also build credibility with financial institutions.

Public-Private Partnerships for Reform

Beyond advocating for credit bureaus and collateral registries, Mr. Twum-Akwaboah proposed a public-private partnership (PPP) framework to expand digital infrastructure across Ghana. According to him, collaboration between government and industry is vital to create the enabling environment for credit reforms to succeed.

By investing in digital platforms and data systems, Ghana can build a reliable credit infrastructure that supports economic growth, boosts investor confidence, and lowers the risk profile of banks.

While the AGI presses for structural reforms, the Bank of Ghana (BoG) has also expressed optimism about reducing lending rates. Governor Dr. Johnson Asiama recently hinted that interest rates could fall to single digits before the end of his tenure. He explained that ongoing monetary policy reforms, coupled with efforts to stabilize inflation and maintain exchange rate discipline, would create favorable conditions for cheaper credit.

This assurance, if realized, would complement AGI’s proposals and ease the financial strain on businesses.

The AGI’s push for credit bureaus and collateral registries represents a strategic step toward curbing loan defaults and creating a fairer lending system in Ghana. By holding borrowers accountable and ensuring transparency in loan repayment, the burden of high interest rates can be lifted from compliant businesses.