Ghana’s banking sector is facing renewed scrutiny after recording a sharp rise in bad debt write-offs, highlighting persistent vulnerabilities within the financial system.
According to the latest data from the Bank of Ghana, banks wrote off a staggering GH¢394.8 million as bad debt in February 2026. This represents a significant 43.4 percent increase compared to the GH¢275.2 million recorded in the same period in 2025.
The provisions, which include loan losses, depreciation, and bad debt expenses, point to the continued strain on banks’ balance sheets. While the industry has shown signs of recovery in some areas, the spike in write-offs suggests that underlying credit risks remain elevated. For many analysts, the figures serve as a stark reminder that the aftershocks of recent economic challenges are still being felt across the financial sector.
Contrasting Trends in Asset Quality
Despite the surge in bad debt write-offs, there are indications of modest improvement in some asset quality indicators. The Non-Performing Loan ratio declined to 18.4 percent in February 2026, down from 22.6 percent a year earlier. This reduction signals that banks are gradually improving their loan recovery strategies and tightening credit risk management frameworks.
Even more notable is the adjusted NPL ratio, which excludes fully provisioned loans. This metric dropped significantly from 8.9 percent in February 2025 to 5.4 percent in February 2026. The improvement suggests that banks are increasingly proactive in addressing distressed assets, either through recoveries or full provisioning.
However, the decline in these ratios has not translated into lower financial losses. The rise in write-offs indicates that banks are cleaning up their books by removing irrecoverable loans, a process that, while necessary, comes at a cost to profitability.
NPL Stock Declines but Risks Persist
Further data from the central bank shows that the total stock of non-performing loans contracted by 5.8 percent to GH¢19.9 billion in February 2026. This marks a turnaround from the 14.9 percent growth recorded during the same period in 2025.
The reduction in NPL stock is a positive development, reflecting improved credit monitoring and a cautious lending environment. Banks have become more selective in extending credit, particularly in high-risk sectors, as they seek to safeguard their asset quality.
Yet, industry experts caution that the decline in NPL stock should not be interpreted as a complete resolution of credit risk challenges. The elevated level of write-offs suggests that a significant portion of these loans has simply been deemed unrecoverable rather than successfully restructured or repaid.
Private Sector Remains the Biggest Contributor
A deeper look into the composition of non-performing loans reveals that the private sector continues to dominate the credit risk landscape. As of February 2026, the private sector accounted for 98.1 percent of total NPLs, up from 96.2 percent in February 2025.
This trend underscores the heavy reliance of Ghana’s banking sector on private sector lending. It also highlights the challenges faced by businesses, many of which are still grappling with high operating costs, currency volatility, and constrained demand.
In contrast, the share of NPLs attributed to the public sector declined to 1.9 percent from 3.8 percent over the same period. This shift indicates a relative improvement in the repayment performance of government-related obligations, though the private sector’s overwhelming share continues to pose systemic risks.
Implications for the Banking Sector
The combination of rising write-offs and declining NPL ratios presents a complex picture for Ghana’s banking industry. On one hand, the reduction in NPL ratios and stock suggests progress in managing bad loans. On the other hand, the sharp increase in write-offs reflects the cost of resolving legacy credit issues.
For banks, the immediate implication is pressure on profitability. Writing off large volumes of bad debt erodes earnings and can limit the capacity to expand lending. This, in turn, has broader implications for economic growth, as access to credit remains a critical driver of business activity.
Moreover, the persistence of asset quality risks may lead to tighter lending conditions. Banks are likely to adopt more conservative credit policies, which could affect small and medium-sized enterprises that already face challenges in accessing financing.
Meanwhile, the outlook for Ghana’s banking sector will depend largely on macroeconomic stability and the effectiveness of ongoing reforms. Efforts to strengthen risk management, enhance credit assessment processes, and improve loan recovery mechanisms will be crucial in sustaining the gains made in reducing NPL ratios.
At the same time, broader economic improvements, including inflation control and currency stability, will play a vital role in supporting borrowers’ repayment capacity. Without these conditions, the risk of further bad debt accumulation cannot be ruled out.
While the latest figures highlight both progress and challenges, they ultimately point to a sector in transition. The clean-up of balance sheets, though painful, is a necessary step toward building a more resilient and sustainable banking system.
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