The Bank of Ghana’s (BoG) strategy to protect the banking sector from rising credit risks has received strong commendation as declining interest rates fuel expectations of a major expansion in lending.
Financial sector experts believe the central bank’s proactive approach will be critical in ensuring that increased credit flow to businesses and individuals does not weaken the stability of the banking industry.
Head of Trading, Global Markets at Absa Bank Ghana Limited, Andrews Akoto, has praised the BoG for introducing measures aimed at maintaining discipline among banks as they position themselves to increase lending following the decline in borrowing costs.
According to him, while the current monetary easing cycle presents a major opportunity for economic growth, it also comes with potential risks if financial institutions relax lending standards in pursuit of rapid loan growth.
“With regard to credit quality, I think the Bank of Ghana has done a lot with that. They have been very proactive. Last year in August, they set a target for non-performing loan ratios”.
Andrews Akoto
Credit expansion raises concerns over loan quality
The reduction in interest rates has created a more favourable environment for businesses seeking financing, particularly small and medium-sized enterprises (SMEs) that have historically struggled with access to affordable credit.
However, the expected increase in lending activity has raised concerns about whether banks could compromise credit assessment processes in their efforts to expand their loan portfolios.
Andrews Akoto explained that lower interest rates could encourage banks to aggressively pursue new customers and increase lending volumes, making proper risk management even more important.
“Essentially, with the lower interest rates, this is very accommodative, and so there will be a lot of loan growth that the banks are postured for. You would see the banks out there actually trying to write more loans.”
Andrews Akoto
The Absa executive noted that the BoG’s interventions provide a necessary framework to ensure banks focus on lending to viable businesses and projects rather than simply increasing loan numbers.
BoG pushes banks toward responsible lending
The central bank has been working to strengthen the resilience of Ghana’s financial sector by encouraging banks to maintain prudent credit underwriting standards.
Akoto believes the measures introduced by the BoG will help prevent a repeat of challenges experienced during previous periods of weak asset quality, when high levels of non-performing loans placed pressure on banks’ balance sheets.
He stressed that banks must carefully evaluate borrowers and ensure that credit is directed toward productive areas of the economy.
“So for the banks, they now have a constraint. Even as they are expanding credit to the private sector, they are to finance the most viable ideas and make sure that they don’t run into a problem where they lend willy-nilly and when the credit cycle turns, they are in trouble again.”
Andrews Akoto
The comments come at a time when the banking sector is expected to play a bigger role in supporting economic recovery through increased private sector financing.
Non-performing loans show signs of improvement
Latest data from the Bank of Ghana indicate that non-performing loans (NPLs) increased marginally to 18.7% in February 2026 from 17.9% in January, after ending 2025 at 18.9%.
Despite the slight monthly increase, the broader trend points to improvements in asset quality compared to the previous year, suggesting that banks have continued efforts to clean up their loan portfolios.
The reduction in bad loan levels compared to earlier periods has been supported by stronger regulatory oversight and improved risk management practices across the financial sector.
The BoG has set an ambitious target of reducing the industry’s NPL ratio to 10% by the end of 2026 as part of efforts to strengthen confidence in the banking system and improve financial sector resilience.
Lower rates create new opportunities for businesses
Meanwhile, Ghana’s declining lending rates are expected to provide relief to businesses and households seeking financing.
Average lending rates fell to 16.33% in April 2026 from 20.58% in January, reflecting the impact of the Bank of Ghana’s monetary easing measures.
The lower borrowing costs are expected to stimulate investment, encourage business expansion and support job creation as companies gain improved access to financing.
However, industry observers have warned that sustainable credit growth will depend on banks maintaining strong lending standards and avoiding excessive risk-taking.
The BoG’s approach seeks to balance these competing priorities by promoting credit expansion while ensuring the financial sector remains stable.
Banking sector stability remains a priority
As Ghana’s economy enters a period of increased credit activity, the ability of banks to manage risks will remain a key focus for regulators.
The BoG’s proactive stance signals a commitment to preventing future disruptions while ensuring that financial institutions contribute meaningfully to economic growth.
With stronger oversight, responsible lending practices and improved asset quality, stakeholders believe Ghana’s banking sector can support businesses without exposing itself to another wave of loan challenges.
The central bank’s strategy is therefore being viewed as a crucial safeguard that could determine whether the next phase of credit expansion becomes a driver of growth or a source of financial pressure.
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