Ghana’s banking sector is recording a major improvement in asset quality as non-performing loans (NPLs) fell to GH¢19.9 billion at the end of June 2026, even as banks dramatically expanded lending to businesses and households.
New data from the Bank of Ghana (BoG) show that the stock of non-performing loans declined from GH¢20.7 billion recorded in June 2025, representing a reduction of about GH¢800 million over the 12-month period.
The improvement becomes even more significant when measured against the rapid expansion of bank credit during the period. Gross loans and advances surged by 39.4% year-on-year to GH¢124.3 billion, compared with only 5.5% growth recorded in June 2025.
The simultaneous decline in bad loans and sharp acceleration in credit growth signals strengthening conditions within Ghana’s banking industry, although important vulnerabilities remain.
NPL Ratio Falls Sharply
The strongest indication of improving asset quality came from the sector’s NPL ratio.
According to the BoG, the industry-wide NPL ratio dropped significantly to 16.1% in June 2026, from 23.1% a year earlier.
This represents a seven percentage point decline within one year and suggests that the rapid expansion in lending has not translated into a proportionate deterioration in loan quality.
The adjusted NPL ratio, which excludes the fully provisioned loan loss category, also recorded a substantial improvement. It declined to 4.6% in June 2026 from 8.5% in June 2025.
The development is particularly important because elevated NPL levels have historically constrained banks’ ability to extend fresh credit, while increasing provisioning requirements and weakening profitability.
The BoG attributed the improvement to reductions in both the stock of NPLs and the overall NPL ratio.
The central bank said the stronger performance of the banking sector’s credit portfolio reflected enhanced loan recovery efforts and improved credit risk management practices.
Credit Growth Accelerates
While bad loans declined, bank lending expanded at a remarkable pace.
Gross loans and advances increased by 39.4% year-on-year to GH¢124.3 billion in June 2026, representing a dramatic acceleration from the 5.5% growth recorded in the same period of 2025.
The private sector was the primary beneficiary of the lending expansion.
Credit extended to private enterprises and households rose by 39.6% to GH¢119.1 billion, compared with growth of 9.2% a year earlier.
As a result, the private sector’s share of total bank credit increased to 96.2%, up from 95.1% in June 2025.
Public sector credit also recovered, although at a much slower pace. Lending to the public sector increased by 5.6% to GH¢4.7 billion after contracting by 31.3% during the corresponding period in 2025.
The figures point to a significant shift in the composition of bank lending, with private businesses and households increasingly driving credit demand.
Private Sector Still Dominates Bad Loans
Despite receiving the overwhelming share of new bank credit, private sector borrowers also accounted for almost all non-performing loans in the industry.
The BoG data show that the private sector’s share of total NPLs increased to 98% in June 2026, from 96.4% a year earlier.
Meanwhile, the public sector’s contribution declined from 3.6% to 2%.
“The distribution of NPLs remains broadly consistent with the sectoral composition of industry credit exposures,” the Bank of Ghana report stated.
The figures therefore reflect the dominant role of private sector borrowers in Ghana’s banking system, both in terms of credit exposure and loan performance.
Agriculture Remains a Major Weakness
Despite the broad improvement in asset quality, not every sector recorded progress.
Agriculture, forestry and fishing emerged as the major exception, with its NPL ratio increasing to 65.1% in June 2026 from 59.1% a year earlier.
The deterioration highlights persistent risks facing agricultural borrowers, who continue to face challenges linked to weather conditions, production costs, market access and repayment capacity.
The BoG, however, noted that improvements across other sectors more than offset the deterioration in agriculture, resulting in an overall strengthening of asset quality across the banking industry.
The development means that while the headline banking sector figures are improving, significant sector-specific risks remain.
Services and Commerce Lead Lending
Bank lending remains concentrated in a handful of major sectors.
The services sector accounted for the largest share of total industry credit at 36.6%, followed by commerce and finance at 24.1%.
Construction also recorded a notable share, accounting for 10.7% of total industry lending.
Together, the three sectors represented 71.4% of total industry credit, slightly below the 72.3% recorded a year earlier.
This concentration means the performance of these sectors could have a significant impact on the overall quality of bank assets as credit continues to expand.
Recovery Could Ease Credit Pressures
The decline in NPLs comes at a critical time for Ghana’s banking industry, particularly as banks increase their willingness to lend.
A sustained reduction in bad loans could improve banks’ confidence in extending credit and potentially support a gradual decline in the cost of borrowing.
However, the BoG cautioned that any reduction in lending rates may be marginal, while vulnerabilities in asset quality remain a concern.
The central bank’s assessment also showed that financial soundness indicators remained broadly positive in June 2026, supported by improvements in solvency, core liquidity and asset quality.
“Efficiency and profitability indicators, however, showed mixed trends during the review period,” the report added.
The latest figures therefore present a banking sector that is lending significantly more while simultaneously making progress in containing bad loans.
If the trend continues, stronger loan recovery, improved credit risk management and sustained asset quality could provide banks with greater room to finance businesses and households, potentially giving further momentum to private sector activity and economic growth.
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