– Bad Loans Remain a Major Risk
Banks operating in Ghana have written off or provided for GH¢1.23 billion in loan losses and depreciation in the first half of 2026, underscoring the continued pressure on the quality of bank assets despite a significant decline in the industry’s non-performing loan ratio.
The amount represents a 38 per cent increase over the GH¢893 million recorded during the same period in 2025, according to the highlights of the Domestic Money Banks’ Income Statement.
The increase in loan-loss provisions points to persistent credit risks within the banking sector, even as key indicators of asset quality have improved over the past year.
The Bank of Ghana, in its July 2026 Monetary Policy Report, said asset quality risks remained elevated in the banking sector as of June 2026.
The central bank, however, noted improvements in several key indicators.
The industry’s non-performing loan (NPL) ratio fell sharply to 16.1 per cent in June 2026, from 23.1 per cent a year earlier.
When loans in the fully provisioned loss category are excluded, the adjusted NPL ratio also improved significantly, declining to 4.6 per cent from 8.5 per cent over the same period.
The stock of non-performing loans also declined, although only marginally, from GH¢20.7 billion in June 2025 to GH¢19.9 billion in June 2026.
The figures suggest that banks have made progress in managing bad loans, but the level of impaired credit remains substantial.
PRIVATE SECTOR BORROWERS DOMINATE BAD LOANS
The latest data also show that the private sector continues to account for the overwhelming majority of non-performing loans in Ghana’s banking system.
Private-sector borrowers accounted for 98 per cent of total NPLs in June 2026, up from 96.4 per cent a year earlier.
The share attributable to the public sector, meanwhile, declined from 3.6 per cent to 2 per cent during the same period.
The Bank of Ghana said the distribution of NPLs broadly reflects the structure of banks’ credit portfolios, with private-sector lending making up the dominant share of industry credit exposure.
The development highlights the continuing credit challenges confronting businesses and households, particularly those struggling to service loans amid changing economic conditions.
IMPROVEMENT, BUT RISKS PERSIST
The decline in the NPL ratio is a positive development for the banking sector, as it indicates an improvement in the ability of borrowers to service their obligations and in banks’ management of credit risk.
However, the rise in loan-loss provisions suggests that banks are still taking significant steps to cushion their balance sheets against potential losses.
The combination of an improving NPL ratio and higher provisions therefore presents a mixed picture of the health of the banking industry.
While fewer loans are classified as non-performing relative to banks’ total loan portfolios, the absolute level of bad loans remains high and continues to require substantial provisions.
The banking sector’s challenge now is to consolidate the improvement in asset quality while ensuring that credit continues to flow to productive sectors of the economy.
For borrowers, particularly businesses, the figures also underline the need for stronger financial management and sustainable borrowing as banks remain cautious about credit risk.
With almost GH¢20 billion in non-performing loans still on banks’ books as of June 2026, asset quality is likely to remain a key issue for the Bank of Ghana and financial institutions in the months ahead.
THE BUSINESS MAIL
