Credit is the oxygen of business.
When banks cannot lend, factories stall, traders cannot stock, and jobs are delayed.
That is why the Bank of Ghana’s directive yesterday carries weight for every Ghanaian.
All financial institutions regulated by the BoG have until December 2026 to reduce their non-performing loan (NPL) ratio to no more than 10 per cent.
The Governor, Dr Johnson Pandit Asiama, announced the six-month target at a forum in Accra, warning that while progress had been made, “the level of bad loans remained unacceptably high.”
“Our regulatory measures require each regulated institution to reduce its ratio to no more than 10 per cent by the end of December this year.”
That is clear, and it is necessary.
The numbers show the sector is healing.
The industry NPL ratio declined to 16.1 per cent at the end of June, 2026, from over 23 per cent a year earlier.
Capital adequacy improved to 20.4 per cent.
Dr Asiama was right to call this “progress and not sufficiency.”
Capital of that order gives banks room to take considered risks.
But when one in every six cedis lent is not performing, that capital is tied up.
Recovery costs rise.
And the flow of credit to businesses, especially small and higher-risk enterprises, is restricted.
High NPLs do not just hurt banks.
They affect the individual looking for personal loan.
They hurt the farmer who cannot get input financing, the SME that cannot expand, and the economy that needs private sector investment to grow.
Cleaning balance sheets is, therefore, not a banking issue.
It is a national growth issue.
Giving banks, specialised deposit-taking institutions and non-bank financial institutions six months to hit 10 per cent sends two signals.
First, it sets urgency.
Without a deadline, loan recovery drifts.
With one, boards must approve NPL reduction plans now, credit appraisal must tighten now, and recovery efforts must intensify now.
Second, it sets credibility.
Markets, depositors and investors watch how regulators enforce discipline.
A clear, time-bound target tells them the BoG is serious about financial stability.
But enforcement must be matched with support.
Simply demanding lower NPLs without addressing why loans go bad will push banks to lend only to the safest borrowers.
That would starve the very SMEs that drive jobs.
The solution must, therefore, be two-pronged: aggressive clean-up of existing bad loans and smarter lending going forward.
However, discussions about NPLs must be situated properly.
The country’s experiences with debt restructuring, banking sector clean-up and IMF programmes show we are vulnerable to shocks.
A permanent institution, funded through carefully managed public resources, could help stabilise the economy as we transition toward reduced dependence on IMF support.
That stability is the foundation on which lower NPLs can be sustained.
For banks, the path is clear.
Strengthen credit appraisal so that new loans do not become tomorrow’s NPLs.
Implement board-approved reduction plans.
Intensify recovery, including using asset sales, restructuring, and where necessary, write-offs.
For businesses, the message is also clear. Keep proper books.
Engage lenders early when cash flow is tight.
A distressed but viable company that comes to the table early has a better chance under the Corporate Insolvency and Restructuring Act (Act 1015) than one that waits until the doors are closed.
For regulators, consistency is key. IFRS 9 is an accounting standard, not a reason to abandon viable businesses.
Prudential rules must protect depositors, but they should also allow room for structured rescue financing.
The 10 per cent NPL target by December is ambitious, but achievable.
The sector has already moved from over 23 per cent to 16.1 per cent in a year.
The payoff will be tangible.
Lower NPLs mean more capital freed for lending. More lending means more businesses funded.
More businesses funded means more jobs and more tax revenue.
That is how financial sector health translates into real economic growth.
Banks must meet the December target.
The Government must deliver the policy framework.
Businesses must borrow responsibly.
If all three hold up their end, then this directive will be remembered not just as a regulatory push, but as the moment the financial sector turned the corner from repair to growth.
The time to act is now.
December is only six months away.
