Ghana’s banking sector has been handed a firm directive that could reshape lending practices and strengthen financial stability before the end of the year.
The Governor of the Bank of Ghana (BoG), Dr. Johnson Pandit Asiama, has ordered all regulated financial institutions to reduce their non-performing loans (NPLs) to no more than 10 percent by December 2026, warning that persistent bad loans continue to limit credit growth and slow economic development.
The announcement sends a strong signal that the central bank is determined to tighten credit discipline while ensuring banks remain in a strong position to support businesses and drive economic expansion.
BoG Sets Tough Deadline for Banks
Speaking at the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana and Bank of Ghana Forum in Accra, Dr. Asiama acknowledged that the banking industry has made remarkable progress in cleaning up its balance sheets over the past year.
According to him, the industry’s NPL ratio declined to 16.1 percent at the end of June 2026, compared to more than 23 percent during the same period in 2025. At the same time, the banking sector’s Capital Adequacy Ratio improved to 20.4 percent, indicating that banks remain well capitalised and capable of supporting prudent lending activities.
Despite these improvements, the Governor stressed that the current level of bad loans remains far above acceptable standards.
“The industry’s non-performing loans ratio declined to 16.1 percent as at end June this year, compared to over 23 percent a year ago, while the Capital Adequacy Ratio stood at 20.4 percent. Capital of that order is what gives a bank the room to take considered risks.”
Dr. Asiama
Progress Is Not Enough
While acknowledging the sector’s achievements, Dr. Asiama cautioned banks against becoming complacent.
He emphasized that the decline in bad loans should be viewed as progress rather than success, insisting that every regulated financial institution must achieve the 10 percent target before the end of December.
“That is progress and not sufficiency, and 16.1 percent remains too high, even if it is fully provisioned. Our regulatory measures require each regulated institution to reduce its ratio to no more than 10 percent by the end of December this year.”
Dr. Asiama
The directive places additional pressure on banks to strengthen internal controls and improve the quality of their loan portfolios over the coming months.
Stronger Credit Management Required
To achieve the ambitious target, the Bank of Ghana expects financial institutions to adopt stricter credit risk management measures.
Dr. Asiama outlined several actions that banks must prioritise, including improving credit appraisal systems, implementing board-approved strategies to reduce bad loans, strengthening loan recovery mechanisms and writing off fully provisioned loans that have no realistic chance of recovery.
These measures are expected to improve the overall quality of bank assets while freeing up capital for new lending opportunities.
Industry analysts believe the directive could encourage banks to become more disciplined in assessing borrowers while also improving monitoring systems throughout the life of a loan.
Why Bad Loans Matter
The Governor explained that high levels of non-performing loans create significant challenges for both banks and the wider economy.
When borrowers fail to repay loans, banks are forced to set aside capital to cover potential losses. This reduces the amount of money available for new lending, particularly to small businesses and borrowers considered higher risk.
“High non-performing loans tie up capital. They raise recovery costs and restrict new credit, more severely for smaller and higher-risk borrowers. So reducing them is therefore not merely a supervisory concern. It is part of Ghana’s development agenda,” Dr. Asiama noted.
By reducing bad loans, banks will be in a stronger position to extend fresh credit to productive sectors of the economy, helping businesses expand operations, create jobs and stimulate economic growth.
Supporting Business Recovery Without Weakening Standards
The Governor also highlighted the growing importance of Ghana’s Corporate Insolvency and Restructuring Act, Act 1015, which provides financially distressed but viable businesses with an opportunity to restructure instead of being liquidated.
He stressed that banks should support businesses with genuine recovery prospects but warned against using restructuring arrangements to disguise existing losses or weaken sound lending standards. “Post-commencement financing must reinforce that discipline, not work around it,” he cautioned.
The remarks reinforce the central bank’s commitment to balancing financial stability with business recovery as Ghana strengthens its insolvency and restructuring framework.
BoG Builds New Framework for Financial Stability
Beyond the immediate NPL target, Dr. Asiama revealed that the Bank of Ghana is collaborating with CIRIP Ghana, the Ghana Association of Bankers, the Institute of Chartered Accountants Ghana and other stakeholders to establish a predictable framework for business rescue financing.
According to him, banks, borrowers, insolvency practitioners and creditors all require clear rules governing restructuring processes, the treatment of distressed assets and the responsibilities of each party when rescue efforts fail.
He argued that a structured framework would reduce uncertainty, improve confidence in the financial system and support sustainable credit expansion.
As Ghana’s banking sector continues to recover from years of elevated bad loans, the latest directive represents one of the strongest regulatory interventions aimed at restoring credit quality. If banks meet the ambitious 10 percent target by December, the move could unlock more lending for businesses, strengthen investor confidence and position the financial sector to play an even greater role in Ghana’s economic transformation.
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