Ghana’s banking sector made a significant provision of GH¢3.82 billion for loan losses, depreciation and other risks in 2024, underscoring the continued pressure on asset quality within the industry.
This was captured in the Domestic Money Banks Income Statement released by the Bank of Ghana, which highlighted the scale of bad debt provisioning undertaken by banks to cushion their balance sheets against credit risks.
Although banks wrote off GH¢1.64 billion in 2025, representing a 57.1 percent reduction compared to the previous year, the high provisioning level reflects the lingering effects of economic headwinds and sector-specific vulnerabilities. The data further shows that while certain asset quality indicators have improved, underlying risks remain elevated.
Asset Quality Risks Remain Elevated
According to the January 2026 Banking Developments Report, the asset quality risks of banks remained elevated in December 2025. However, there were signs of gradual improvement in some metrics. The industry’s Non-Performing Loans ratio declined to 18.9 percent in December 2025, from 21.8 percent in December 2024.
Similarly, the NPL ratio adjusted for the fully provisioned loan loss category declined from 8.5 percent to 5.0 percent during the same comparative period. This suggests that banks are increasingly making adequate provisions and cleaning up their loan books, thereby improving the adjusted risk profile of the industry.
Despite the improvement in ratios, the stock of non-performing loans increased marginally. The NPL stock rose by 0.8 percent to GH¢21.0 billion in December 2025. This compares with a sharp growth of 31.4 percent recorded in December 2024, indicating that while the pace of deterioration has slowed significantly, the absolute value of troubled loans remains high.
Private Sector Bears the Brunt
A closer look at the composition of non-performing loans reveals that the private sector continues to account for the overwhelming majority of distressed credit. The decomposition of the NPL showed that the private sector accounted for the most non-performing loans, due to its dominant holdings in total credit.
The proportion of NPLs attributable to the private sector increased to 97.5 percent in December 2025, from 96.2 percent in December 2024. In contrast, the share of the public sector declined to 2.5 percent, from 3.8 percent a year earlier.
This trend highlights the concentration of credit risk within private enterprises, particularly small and medium-sized businesses that often face liquidity constraints during periods of economic tightening. It also reflects the fact that banks’ loan portfolios are heavily skewed toward private sector lending.
Sectoral Performance Mixed
While the overall NPL ratio declined on a year-on-year basis, sector-specific developments present a mixed picture. According to the Bank of Ghana, the decline in the industry NPL ratio year-on-year reflected improvements in asset quality across all but two sectors during the review period.
Accordingly, the NPL ratios in the construction, and agriculture, forestry and fishing sectors increased from 29.8 percent and 38.0 percent to 30.7 percent and 46.3 percent, respectively.
The surge in the agriculture, forestry and fishing sector’s NPL ratio to 46.3 percent is particularly concerning. This sector plays a critical role in Ghana’s economy, employing a significant portion of the workforce and contributing substantially to GDP. Rising loan defaults within this segment may reflect exposure to climate variability, input cost pressures and market access challenges.
Similarly, the construction sector’s NPL ratio edged up to 30.7 percent, pointing to persistent stress in infrastructure and real estate-related activities. Delayed payments, cost overruns and subdued demand could be contributing to the sector’s credit challenges.
All other sectors recorded improvements in asset quality during the review period. This broad-based improvement outside the two stressed sectors helped moderate the overall industry NPL ratio and suggests that corrective measures, including tighter credit risk management and restructuring strategies, are yielding results.
Balancing Provisioning and Profitability
The GH¢3.82 billion provisioning in 2024 demonstrates banks’ commitment to strengthening their financial buffers. Provisions for loan losses directly impact profitability in the short term, but they enhance resilience and protect depositors’ funds over the long term.
The fact that banks reduced write-offs to GH¢1.64 billion in 2025 indicates that earlier aggressive provisioning may be helping to stabilise credit quality. By proactively recognising potential losses, banks are better positioned to absorb shocks and maintain confidence in the financial system.
However, the elevated stock of GH¢21.0 billion in non-performing loans signals that the clean-up process is not yet complete. Sustained economic growth, improved borrower performance and continued prudential oversight by the Bank of Ghana will be essential in driving further improvements.
The latest data paints a cautiously optimistic picture, one where progress is evident but vigilance remains critical.
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