ELS:MBN360 BANKING
Ghana’s banking sector has written off a staggering GH¢883.7 million in bad loans within the first four months of 2026, highlighting the enormous cost of loan defaults even as the industry records signs of improving asset quality.
Fresh figures from the Bank of Ghana’s Domestic Money Banks Income Statement reveal that the amount written off between January and April 2026 represents a sharp 35.1 percent increase compared to the GH¢654.2 million recorded during the same period in 2025. The development underscores the persistent challenges banks continue to face in recovering loans from borrowers despite broader improvements in credit risk indicators.
The latest data paints a picture of a banking sector that is making progress in cleaning up its balance sheets while simultaneously absorbing significant financial losses from loans that have become virtually impossible to recover.
Bad Loan Write-Offs Hit Record Levels
The GH¢883.7 million write-off reflects an aggressive effort by banks to remove defaulted and uncollectable loans from their books. According to the Bank of Ghana, the total provisions made by banks covered loan losses, depreciation, and other related items.
Loan write-offs are a standard accounting practice used by financial institutions when borrowers fail to repay their obligations over an extended period, typically after more than 180 days of default. Rather than keeping these non-performing assets on their balance sheets indefinitely, banks remove them to present a more accurate picture of their financial health.
While such write-offs improve the quality of banks’ balance sheets, they also represent real financial losses that can affect profitability and capital levels if they continue to rise.
The more than GH¢883 million written off within just four months demonstrates the scale of the credit challenges that still exist in parts of Ghana’s economy.
Asset Quality Shows Encouraging Improvement
Despite the surge in loan write-offs, the Bank of Ghana’s report also offers encouraging news regarding the overall quality of bank assets.
The industry’s Non-Performing Loans ratio declined significantly to 18.0 percent in April 2026 from 23.6 percent recorded in April 2025. This marks a substantial improvement in the proportion of loans that have fallen into default.
The improvement becomes even more pronounced after adjusting for fully provisioned loan losses. Under this measure, the adjusted NPL ratio declined from 9.0 percent a year earlier to just 5.6 percent in April 2026.
These figures suggest that banks have strengthened their credit risk management practices while actively addressing legacy problem loans that accumulated over previous years.
For investors and depositors, the declining NPL ratio signals that Ghana’s banking industry is becoming more resilient despite continuing challenges in specific sectors.
Total Bad Loans Continue to Decline
Another positive development emerging from the central bank’s report is the reduction in the total stock of non-performing loans across the banking sector.
The value of bad loans declined to GH¢20.7 billion in April 2026 from GH¢21.7 billion recorded during the same period last year. Although the reduction may appear modest, it represents meaningful progress considering the difficult operating environment faced by many businesses.
The decline indicates that banks are gradually recovering from previous credit shocks while strengthening loan recovery efforts and improving lending standards.
It also reflects the impact of stricter supervision by the Bank of Ghana and more disciplined risk management across financial institutions.
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Private Sector Dominates Loan Defaults
The report also reveals where the bulk of Ghana’s bad loans are concentrated.
The private sector continues to account for almost all non-performing loans within the banking industry. According to the data, 98.2 percent of all bad loans originated from private sector borrowers in April 2026, compared to 96.5 percent a year earlier.
Meanwhile, the share attributed to the public sector declined sharply from 3.5 percent to just 1.8 percent over the same period.
The figures suggest that while government-related credit exposure has improved, businesses and private borrowers remain the primary source of credit risk for banks.
Given that private enterprises account for the largest share of total bank credit, the trend is not entirely surprising. However, it reinforces the need for stronger credit assessment, improved financial management among businesses, and enhanced loan monitoring.
Agriculture Emerges as the Biggest Concern
Although most sectors experienced improvements in asset quality, one sector continues to raise red flags.
According to the Bank of Ghana, the agriculture, forestry and fishing sector recorded a worsening loan performance during the review period.
The sector’s Non-Performing Loans ratio climbed from an already alarming 62.1 percent in April 2025 to an even higher 66.1 percent in April 2026.
The increase makes agriculture the only major sector where asset quality deteriorated over the past year.
This trend could reflect several challenges affecting agricultural borrowers, including climate-related risks, rising production costs, fluctuating commodity prices, and limited access to modern farming technologies that affect productivity and repayment capacity.
The continued deterioration in agricultural loan performance may prompt banks to tighten lending standards for the sector unless additional risk-sharing mechanisms and policy interventions are introduced.
Banking Sector Balances Recovery with Caution
Although the surge in loan write-offs may appear alarming, the broader data presents a more balanced outlook for Ghana’s banking industry.
Banks are actively cleaning up their balance sheets by removing long-standing bad debts while simultaneously recording lower non-performing loan ratios and reducing the overall stock of troubled loans.
This suggests that financial institutions are becoming more disciplined in managing credit risk, even as they absorb substantial losses from legacy defaults.
Going forward, maintaining this momentum will require stronger loan recovery strategies, prudent lending practices, and continued improvements in the financial health of businesses across key sectors of the economy.
The latest figures demonstrate that while Ghana’s banking sector is steadily strengthening, the battle against bad loans is far from over.
