Banking sector battles NPLs despite signs of recovery
By Praisebell Rosemond Larbi
The nation’s banking industry continues to grapple with non-performing loans (NPLs), as new data from the Bank of Ghana (BoG) shows a slight increase in the first half of 2025, despite signs of improving asset quality.
According to the BoG’s July 2025 Monetary Policy Committee (MPC) Report, the total stock of NPLs rose by 1.3 per cent to GHS20.7 billion in June 2025, up from GHS20.4 billion in June 2024.
This represents a 49.4 per cent year-on-year growth, although there was a decline in the share of foreign currency-denominated NPLs, suggesting improved repayment performance among exporters and dollar-based borrowers.
Despite the uptick, the central bank noted that the industry’s NPL ratio declined to 23.1 per cent in June 2025, from 24.2 per cent a year earlier.
When the fully provisioned loan loss category is adjusted, the NPL ratio drops further to 8.5 per cent, compared to 10.8 per cent in June 2024. This is a sign of gradual improvement in asset quality.
“The decline in the NPL ratio during the period under review is explained by the lower growth in the NPL stock relative to the growth in total loans,” the BoG stated.
Private Sector Accounts for Most Defaults
The private sector continues to dominate the share of non-performing loans due to its larger credit exposure.
It accounted for 96.4 per cent of total NPLs in June 2025, slightly higher than 95.6 per cent in June 2024, while the public sector’s share declined from 4.4 per cent to 3.6 per cent.
The commerce and finance sector recorded the highest NPL ratio of 27.0 per cent, up from 19.7 per cent a year earlier, followed by the services sector with 25.7 per cent, marginally down from 26.6 per cent.
The agriculture, forestry and fishing sector also saw a rise in defaults, while the manufacturing sector’s NPL ratio remained unchanged.
BoG Moves to Curb NPL Growth
To contain rising NPLs, the BoG has intensified regulatory measures, requiring banks to cap their NPL ratios at 10 per cent of gross loans by December 2026.
It has also directed financial institutions to identify and blacklist wilful defaulters in their audited statements and share their identities with relevant oversight bodies.
The central bank further instructed microfinance and savings and loans companies to maintain prudential limits on bad loans, warning that elevated NPLs threaten liquidity, profitability and overall financial stability.
Banking Sector Remains Profitable
Despite credit quality challenges, the banking sector remained profitable in the first half of 2025.
The industry’s profit-before-tax (PBT) increased by 32.2 per cent to GHS10.8 billion, from GHS8.1 billion a year earlier, while profit-after-tax (PAT) rose by 32.6 per cent to GHS7.2 billion.
The performance was driven by higher interest income and efficiency improvements, though liquidity levels moderated slightly.
The BoG noted that financial soundness indicators showed stronger solvency and asset quality, with continued improvements expected through recapitalisation, enhanced loan recovery and stricter credit underwriting standards.
The regulator is confident that ongoing reforms will sustain growth, support credit expansion and strengthen the resilience of Ghana’s financial system.
