Credit growth in Ghana’s banking sector weakened significantly in the first ten months of 2025, reflecting a cautious lending environment and reduced appetite for risk among banks.

According to the Bank of Ghana’s Banking Sector Development Report, total net credit flows slowed sharply to GH¢8.626 billion as of October 2025. This represents a steep year-on-year reduction compared with the GH¢20.952 billion recorded over the same period in 2024.

The report attributes the slowdown largely to a marked decline in lending to the public sector, coupled with a moderation in credit expansion to the private economy. Banks maintained a conservative stance, preferring to channel funds into Government of Ghana and Bank of Ghana securities rather than extending loans across the economy. This shift underscores the broader tightening of credit conditions amid ongoing macroeconomic adjustments.

Public Sector Credit Contracts Sharply

A key driver of the overall credit slowdown was the significant contraction in public sector borrowing. Credit to the public sector declined by GH¢3.445 billion, representing a 45.2 percent contraction in the year to October 2025. This contrasts sharply with the GH¢1.516 billion expansion, or 24.8 percent growth, recorded over the same period in 2024.

The Bank of Ghana explained that this reversal reflects the government’s fiscal consolidation efforts, which have resulted in reduced reliance on bank financing. As authorities work to restore fiscal discipline and manage debt sustainability, borrowing from the domestic banking system has been scaled back. While this has eased pressure on banks’ balance sheets, it has also contributed significantly to the slowdown in overall credit growth.

Banks Prioritise Safety Over Expansion

The report highlights that banks continued to demonstrate a strong preference for relatively low risk investments, particularly government and central bank securities. This cautious posture has limited the pace of new lending, especially in an environment where risk perceptions remain elevated. As a result, even though liquidity conditions have improved in parts of the system, credit creation has not accelerated in line with expectations.

This trend suggests that banks are prioritising asset quality and capital preservation over aggressive loan growth. While such prudence enhances financial stability, it also raises concerns about the availability of credit to support economic expansion, especially for businesses seeking financing for growth and investment.

Despite the overall moderation in credit growth, the private sector continued to dominate lending activity in the banking system. Private sector credit expanded by GH¢12.072 billion, representing a growth rate of 13.9 percent in the year to October 2025. Although this marks a slowdown from the 28.8 percent growth recorded in 2024, it confirms that businesses and households remain the primary recipients of new loans.

The private sector’s share of total outstanding credit rose to 95.9 percent in October 2025, up from 91.9 percent a year earlier. In nominal terms, private sector credit stood at GH¢98.918 billion at the end of October 2025, compared with GH¢86.846 billion in October 2024. This dominance reflects the sharp pullback in public sector borrowing and reinforces the central role of private enterprise in sustaining credit demand.

Services Sector Leads Credit Allocation

A sectoral breakdown of private sector credit flows reveals notable shifts in lending patterns across the economy. The services sector emerged as the largest destination of new credit, accounting for 77.7 percent of annual private sector credit flows in October 2025. This represents a dramatic increase from the 24.5 percent share recorded during the same period in 2024.

The surge in services sector lending highlights growing demand for financing in areas such as trade, transport, telecommunications and other service-oriented activities. These sectors have become key drivers of economic activity and continue to attract bank financing despite the cautious lending environment.

Beyond services, the manufacturing sector also recorded an improved share of credit flows, accounting for 18.8 percent of private sector lending in October 2025. This compares favourably with the 10.6 percent share recorded a year earlier, suggesting renewed interest in supporting industrial and value-added activities.

Similarly, the mining and quarrying sector saw a substantial increase in its share of credit flows, rising to 11.9 percent from just 2.5 percent in 2024. This growth reflects increased financing needs in extractive industries, possibly linked to expansion projects and improved commodity market conditions.

The sharp decline in public sector credit and the moderation in private sector lending have important implications for Ghana’s economic outlook. While reduced government borrowing supports fiscal sustainability, the subdued pace of overall credit growth could constrain investment and limit the economy’s growth potential if prolonged.