The Managing Director of CalBank PLC, Carl Asem, has sounded a strong warning to Ghana’s banking industry, urging institutions to rethink their heavy reliance on loan-based income.
According to him, the traditional model of generating profits primarily through lending is becoming increasingly unsustainable in a changing interest rate environment.
Speaking at the Ghana Stock Exchange Facts Behind the Figures event, Asem noted that declining policy rates are steadily compressing loan margins. This, he explained, is putting pressure on banks that depend heavily on interest income from credit facilities.
He stressed that while lending remains a core function of banking, it can no longer serve as the dominant revenue stream if banks are to remain competitive and resilient.
Declining Loan Margins Raise Concerns
The shift in Ghana’s monetary environment has created new realities for financial institutions. In recent years, banks benefited from relatively high interest rates, which supported strong returns on loans. However, as rates begin to normalize, the profitability of lending activities is narrowing.
Asem pointed out that this trend is not temporary but structural. As such, banks must act decisively to reposition themselves.
“For banks to be relevant, it is not only about giving loans but being relevant by providing the necessary support to our customers. That support is not only giving them loans, which is laudable, but also the advisory services that we offer.”
Carl Asem
This evolving landscape demands innovation and a broader approach to financial services beyond conventional credit offerings.
Rise of Fee-Based and Advisory Services
In response to these challenges, CalBank has strategically expanded its focus on non-funded income. This refers to revenue generated from services rather than loans. These services include business advisory, cash flow management, trade facilitation, treasury operations, and structured finance support.
Asem emphasized that such services not only diversify income streams but also strengthen relationships with clients by offering value beyond financing.
“We have always made sure that loans alone do not become our only income revenue generation but the advisory services and the fees and commissions that we also render.”
Carl Asem
This approach positions banks as financial partners rather than mere lenders, enabling them to support clients across various stages of business growth.
Strong Performance from Non-Funded Income
CalBank’s strategy is already yielding tangible results. Non-funded income has consistently contributed over 40 percent of the bank’s total revenue in recent years. In the first quarter of 2026, this figure rose to 46 percent, underscoring the effectiveness of the bank’s diversification efforts.
Asem described this performance as the outcome of a deliberate and sustained strategy rather than a short-term adjustment.
“If you see our book today, we see that 46 percent, but that is what we have done the last two years, sustainable, always operating a non-funded income ratio around 42 to 43 percent throughout the last three years.”
Carl Asem
This consistency highlights the growing importance of service-based income in ensuring financial stability.
Navigating Asset Quality Challenges
The shift towards non-funded income was also influenced by the need to address asset quality concerns. Like many banks in Ghana, CalBank faced challenges during the domestic debt restructuring period, which impacted loan performance.
In response, the bank deliberately slowed its loan growth to stabilize its portfolio. This cautious approach has paid off, with the non-performing loan ratio dropping significantly from 45.5 percent to 15.1 percent within a year.
Additionally, the bank’s capital adequacy ratio has improved to 17.2 percent, reflecting stronger financial health and resilience.
These improvements demonstrate that reducing reliance on aggressive lending can support long-term stability.
Continued Support for SMEs
Despite its strategic shift, CalBank remains committed to supporting small and medium-sized enterprises. Asem noted that the bank continues to provide working capital through both direct lending and contingency arrangements.
However, the approach has evolved. Credit is now offered alongside advisory services, ensuring that businesses receive comprehensive support rather than just financing.
This integrated model helps SMEs make better financial decisions, manage risks effectively, and scale sustainably.
A Blueprint for the Banking Industry
As Ghana’s banking sector adapts to a more normalized interest rate environment, CalBank’s model offers valuable lessons. The emphasis on fee-based income and advisory services provides a more stable and diversified revenue base.
The future of banking, he suggests, lies in innovation, customer-centric services, and the ability to generate value beyond loans. Institutions that embrace this shift will be better positioned to thrive in an increasingly competitive and dynamic market.
As interest rate dynamics change, banks must rethink their strategies and embrace new sources of income.
Diversification through non-funded income is no longer optional but essential. By expanding into advisory and service-based offerings, banks can build resilience, enhance customer relationships, and secure sustainable growth.
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