All financial institutions regulated by the Bank of Ghana (BoG) have been given up to December 2026 to reduce their non-performing loans (NPLs) ratio to not more than 10 per cent as part of measures to strengthen the banking sector and restore credit growth, the Governor of the central bank, Dr Johnson Pandit Asiama, has directed.
The directive requires regulated financial institutions to reduce the portion of their loans that are going bad to a maximum of 10 per cent by the end of the year.
It applies to commercial banks, specialised deposit-taking institutions, and non-bank financial institutions who are enjoined to recover every loan they give out to their clients.
However, microfinance firms are to maintain a stricter five per cent limit.
Failure to meet the target by the deadline could result in regulatory restrictions, including a ban on dividend and share bonus payments from January 2027, and limitations on expanding loan portfolios for institutions that remain above the prescribed threshold.
The banking industry's NPLs ratio declined to 16.1 per cent at the end of June 2026 from over 23 per cent a year earlier, while the capital adequacy ratio had improved to 20.4 per cent.
However, Dr Asiama stressed that despite the progress, the level of bad loans remained unacceptably high, tying up capital, increasing recovery costs and restricting the flow of credit to businesses, particularly small and higher-risk enterprises.
Speaking at a forum on NPLs at the Bank Square in Accra yesterday, Dr Asiama urged banks to strengthen credit appraisal processes, implement board-approved NPL reduction plans and intensify loan recovery efforts to meet the year-end target.
"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," he said.
Background
The forum was jointly organised by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana and the BoG to examine the challenges of financing financially distressed but viable businesses undergoing corporate rescue.
It was held on the theme: "Financing distressed companies: The impact of non-performing loans (NPLs), IFRS 9 standards, and prudential regulations on post-commencement financing for distressed companies under rescue and possible interventions."
The event was chaired by the Board Chairman of Scancom PLC (MTN Ghana) and Founder of Ishmael Yamson & Associates, Ishmael Yamson, and brought together policymakers, regulators, insolvency practitioners, bankers and accounting professionals.
Speakers included former Finance Minister and Economic Advisor to the President, Seth Terkper; President of CIRIP Ghana, Felix Addo; and the Coordinating Director (Technical) at the Ministry of Finance, Samuel Danquah Arkhurst.
Banking sector resilience
Dr Asiama, who was the keynote speaker, stated: "The industry's non-performing loans ratio declined to 16.1 per cent as at end-June this year, compared to over 23 per cent a year ago, while the capital adequacy ratio stood at 20.4 per cent.
"Capital of that order is what gives a bank the room to take considered risks, but that is progress and not sufficiency."
Rescue framework
The Governor called for the establishment of a predictable national framework to guide business rescue financing and ensure that distressed but viable companies could access funding without undermining financial stability.
He said the framework should clearly define the evidence required to prove a company's commercial viability, the controls governing post-commencement financing, and the responsibilities of lenders, insolvency practitioners, shareholders and creditors.
"Ghana needs a predictable framework, not case-by-case improvisation," he said.
Fiscal trust
Mr Terkper called for the establishment of a Fiscal Trust to serve as a financial buffer for both government and private sector bailouts during periods of economic distress.
He explained that Ghana's recent experiences with sovereign debt restructuring, banking sector reforms and IMF-supported programmes underscored the need for permanent the need for permanent institutions to manage financial shocks and reduce the economy's vulnerability to crises.
"We need structures. We need institutions to prevent this from happening; a trust that will help bailouts, not just for the private sector but also the public sector, including the government itself, is a means of stabilising our economy," Mr Terkper said.
He added that such a mechanism could be financed through carefully managed public resources and would complement existing fiscal buffers, helping Ghana build greater resilience as it transitions towards reduced dependence on IMF support programmes.
Macroeconomic stability
Mr Arkhurst, who represented the sector minister, said the Ministry of Finance recognised that high levels of non-performing loans undermined banks' profitability, reduced lending capacity, increased borrowing costs and ultimately constrained private sector investment and economic growth.
He said while some businesses faced temporary liquidity challenges arising from economic shocks, supply chain disruptions and changing market conditions, many could recover with effective restructuring mechanisms and access to responsible financing.
He added that the government remained committed to strengthening the country''s insolvency and restructuring framework by adopting international best practices while sustaining the macroeconomic stability achieved over the past 18 months through fiscal consolidation, prudent monetary policy and ongoing structural reforms.
Rescue financing challenge
For his part, Mr Addo, in an interview with the media on the sidelines of the forum, said although the Corporate Insolvency and Restructuring Act (Act 1015) provided a legal framework for rescuing financially distressed but viable companies, access to fresh financing remained a major obstacle.
This, he said, was because of the IFRS 9 requirements and the Bank of Ghana's prudential regulations.
He added that CIRIP Ghana was exploring options such as ring-fencing new loans under independent administration and establishing a restructuring fund to provide post-commencement financing without compromising depositor protection or financial stability.
