BoG Sets 10% Bad Loan Target for Banks

The Bank of Ghana (BoG) has directed all regulated financial institutions to reduce their non-performing loans (NPLs) to no more than 10 per cent by the end of December 2026, as part of efforts to strengthen credit quality and unlock greater lending to the private sector.

Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, said although the banking industry has made considerable progress in reducing bad loans and improving capital buffers, the current level of impaired assets remains too high to support the country’s economic ambitions.

Addressing participants at the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana and Bank of Ghana Forum in Accra, Dr Asiama revealed that the industry’s NPL ratio had fallen to 16.1 per cent at the end of June 2026 from more than 23 per cent during the corresponding period last year.

He also noted that the banking sector’s Capital Adequacy Ratio had strengthened to 20.4 per cent, providing institutions with a stronger capital base to support prudent lending.

“The industry’s non-performing loans ratio declined to 16.1 percent as at end-June this year, compared to over 23 percent a year ago, while the Capital Adequacy Ratio stood at 20.4 percent. Capital of that order is what gives a bank the room to take considered risks.”

Despite the improvement, the Governor stressed that banks must intensify efforts to reduce bad loans, describing the current ratio as well above acceptable levels.

“That is progress and not sufficiency, and 16.1 percent remains too high, even if it is fully provisioned. Our regulatory measures require each regulated institution to reduce its ratio to no more than 10 percent by the end of December this year.”

Dr Asiama explained that the central bank expects regulated institutions to meet the target through more rigorous credit assessment procedures, board-approved strategies for reducing impaired assets, stronger loan recovery efforts and the timely write-off of fully provisioned facilities with no realistic prospect of recovery.

According to him, lowering the stock of non-performing loans is essential to improving credit flows to businesses, particularly small and medium-sized enterprises, while supporting broader economic growth.

“High non-performing loans tie up capital. They raise recovery costs and restrict new credit, more severely for smaller and higher-risk borrowers. So reducing them is therefore not merely a supervisory concern. It is part of Ghana’s development agenda.”

The Governor also highlighted the importance of maintaining sound lending practices as Ghana advances the implementation of the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), which provides financially distressed but viable businesses with an opportunity to restructure rather than face liquidation.