The Bank of Ghana (BoG) has directed all commercial banks to reduce their non-performing loan (NPL) ratios to below 10% by the end of December 2026. This mandate aims to strengthen financial stability, improve credit growth, and support the sustainable financing of businesses across Ghana.
This directive follows a significant decline in NPL ratios, which fell to 16.1% by June 2026 from more than 23% in 2025. The central bank implemented various regulatory measures to achieve this initial reduction. Banks failing to meet the 10% target by the deadline must notify the regulator within 10 days and submit a board-approved reduction plan.
This push aligns with Ghana's broader economic strategy to foster a more robust financial sector. High NPLs have historically constrained banks' ability to extend new credit, particularly to smaller and higher-risk borrowers. Reducing these bad loans is essential for lowering interest rates and stimulating economic activity, which saw Ghana's economy grow by 4.7% in April 2026.
Dr. Johnson Pandit Asiama, Governor of the Bank of Ghana, reiterated this directive at a forum organized by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP), Ghana. He stated, "That is progress and not sufficiency, and 16.1 percent remains too high, even if it is fully provisioned." He stressed that the 10% target is a regulatory requirement for all regulated institutions.
The implications of this directive are far-reaching for the banking sector and the wider economy. Banks will need to intensify their loan recovery efforts and improve their credit assessment processes. This could lead to more cautious lending in the short term but is expected to result in a healthier, more resilient banking system capable of supporting long-term economic growth. Decision-makers will closely monitor banks' compliance and the impact on overall credit availability.
Dr. Asiama also highlighted the importance of Ghana's Insolvency and Restructuring Act, which provides a framework for restructuring viable distressed businesses. He urged banks to distinguish between firms facing temporary cash flow shocks and those heading for inevitable failure. He cautioned that without proper viability assessments, lenders risk concealing losses and weakening credit discipline.
He encouraged banks to ring-fence and monitor new financing provided to distressed companies. Such funds must be directed towards productive activities like retaining employees, securing inputs, and completing contracts. Dr. Asiama emphasized that legal priority alone does not make a transaction prudent or bankable. Post-commencement financing needs clear milestones, security arrangements, and transparent reporting.
Dr. Ishmael Yamson, Board Chair of Scancom PLC (MTN Ghana), acknowledged the NPL decline but raised concerns about certain regulatory measures. He noted that restrictions on dividends, bonuses, and lending for banks with high NPL ratios could discourage rescue financing. Dr. Yamson suggested carving out commencement financing from NPL ratio calculations for a defined rescue period. This would prevent penalizing banks that finance sanctioned rescue plans.
He also called for policymakers to focus on strengthening businesses' capacity to manage risks and avoid distress. Dr. Yamson advocated for prudential regulations that protect financial stability while allowing necessary financing. This approach would preserve jobs, sustain enterprises, and support economic growth. The central bank's firm stance underscores its commitment to a stable financial environment, even as it navigates the complexities of supporting distressed businesses.