Ghana’s banking industry has recorded a notable improvement in the quality of its loan portfolio, with the value of non performing loans falling to GH¢19.9 billion by the end of June 2026, compared with GH¢20.7 billion during the corresponding period of 2025.
Fresh figures from the Bank of Ghana indicate that the improvement was even more pronounced when measured against the overall size of the banking sector’s credit portfolio. The industry’s non performing loan ratio declined substantially from 23.1 percent in June 2025 to 16.1 percent in June 2026.
The adjusted non performing loan ratio, which excludes loans already fully covered by provisions, also recorded a significant reduction, falling from 8.5 percent to 4.6 percent over the same period. The figures point to a broad strengthening of asset quality across the banking sector, although the central bank continues to regard elevated credit risk as an important vulnerability.
The latest development comes as the Bank of Ghana intensifies regulatory measures designed to address persistent non performing loans and strengthen the capacity of regulated financial institutions to manage problem assets. The central bank announced additional measures on September 8, 2026, aimed at reducing non performing loans and limiting their potential effects on lending, profitability, liquidity, solvency and overall financial stability.
The distribution of troubled loans, however, remains heavily concentrated within the private sector. Private borrowers accounted for approximately 98 percent of the banking industry’s total non performing loans in June 2026, an increase from 96.4 percent recorded one year earlier.
The contribution of the public sector moved in the opposite direction, declining from 3.6 percent to 2 percent during the period under review.
According to the Bank of Ghana, the pattern remains broadly consistent with the distribution of credit across the banking industry because private enterprises and households continue to receive the overwhelming proportion of bank financing.
The central bank said the general improvement in asset quality was supported by better performance across most segments of the economy. The principal exception was agriculture, forestry and fishing, where credit quality deteriorated further.
The non performing loan ratio within agriculture, forestry and fishing climbed from 59.1 percent in June 2025 to 65.1 percent in June 2026, making the sector a significant area of concern for financial institutions.
Nevertheless, the Bank of Ghana indicated that improvements recorded in other areas of the economy were sufficiently strong to outweigh the deterioration in agriculture, forestry and fishing, thereby producing an overall improvement in banking sector asset quality.
The reduction in troubled loans has been attributed partly to stronger recovery initiatives by banks and more effective approaches to credit risk management. These developments have helped reduce the volume of distressed credit while simultaneously supporting the expansion of performing loans across the industry.
The central bank’s assessment suggests that the banking sector is operating under improved credit conditions, although significant risks remain. The continued reduction of non performing loans could eventually create room for a gradual easing of the cost of borrowing, although any reduction in lending rates is expected to be measured rather than dramatic.
The level of bad loans remains particularly important because it influences the willingness of financial institutions to extend fresh credit to businesses and households. When banks face persistent repayment difficulties within their loan portfolios, they generally become more cautious about approving new facilities, particularly for borrowers considered to carry higher levels of risk.
The latest figures therefore provide an important indication that the banking industry is becoming better positioned to expand lending while maintaining greater discipline in credit assessment.
The improvement in asset quality has occurred alongside a substantial acceleration in bank lending. Bank of Ghana figures show that gross loans and advances increased by 39.4 percent year on year to GH¢124.3 billion at the end of June 2026.
The pace of expansion represents a sharp turnaround from the 5.5 percent growth recorded during the same period of 2025.
Private sector borrowing was the principal force behind the expansion. Credit extended to private enterprises and households increased by 39.6 percent to GH¢119.1 billion, compared with growth of 9.2 percent during the corresponding period of the previous year.
Public sector credit also returned to growth, expanding by 5.6 percent to GH¢4.7 billion after registering a contraction of 31.3 percent during the comparable period in 2025.
Consequently, private sector borrowers increased their dominance of the banking industry’s credit portfolio, with their share rising from 95.1 percent to 96.2 percent. The public sector’s share correspondingly declined from 4.9 percent to 3.8 percent.
The expansion of lending also remained concentrated within several major areas of economic activity.
The services sector continued to receive the largest portion of bank credit, accounting for 36.6 percent of total industry lending. Commerce and finance followed with 24.1 percent, while construction represented 10.7 percent.
Taken together, these three sectors absorbed 71.4 percent of total credit extended by the banking industry. Although the concentration remains substantial, it represents a modest decline from the 72.3 percent recorded one year earlier.
The figures consequently point to a banking sector that is simultaneously expanding its lending activity and improving the quality of its credit portfolio.
The broader financial soundness indicators also remained encouraging during the period under consideration. The Bank of Ghana reported improvements in key areas including solvency, core liquidity and asset quality.
The central bank’s July 2026 monetary policy assessment similarly described the banking sector as having recorded robust performance in June, with total assets rising by 30.7 percent to GH¢502.4 billion. The Capital Adequacy Ratio also strengthened considerably, reaching 20.4 percent in June 2026 compared with 10.6 percent a year earlier.
Bank lending has also been supported by a considerably more favourable monetary environment. The Bank of Ghana reported that average lending rates declined to 15.6 percent in June 2026 from 27 percent one year earlier, while private sector credit expanded strongly during the period.
Despite the encouraging developments, the central bank has maintained that the banking industry must remain vigilant because the level of credit risk is still elevated.
The continuing weakness within agriculture, forestry and fishing demonstrates that improvements in the overall banking sector have not been evenly distributed. It also highlights the importance of stronger underwriting standards, effective monitoring of borrowers and sustained recovery efforts.
The latest performance nevertheless represents a significant improvement from the conditions witnessed in previous years and reinforces evidence of a banking sector that has become more resilient.
With non performing loans declining, credit expansion accelerating and key solvency indicators strengthening, Ghana’s banking industry appears to be entering the second half of 2026 from a considerably stronger financial position.
The challenge for banks and regulators now is to ensure that the rapid expansion of credit does not eventually reverse the gains made in asset quality. The ability to maintain disciplined lending while extending more financing to productive businesses and households will therefore remain central to the stability and effectiveness of Ghana’s financial sector.
