Ghanaian Banks Write Off GH¢1.05bn in Bad Loans Amid Improved Asset Quality

Accra, Ghana — Ghana’s banking industry wrote off approximately GH¢1.05 billion as bad debt in the first eight months of 2025, representing a 46% decline compared to the same period in 2024.

The Bank of Ghana disclosed the figures in its Domestic Money Banks (DMBs) Income Statement for August 2025, attributing the decline to improved loan performance and stronger credit risk management across the sector.

In the same period in 2024, banks had written off GH¢1.95 billion, reflecting the lingering after-effects of the economic slowdown and the Domestic Debt Exchange Programme (DDEP).

Interest Expenses and Profitability Pressure

During the review period, interest expenses across the banking sector rose to GH¢10.11 billion, marking a 20.9% year-on-year increase. The rise was mainly due to higher cost of deposits and increased competition for liquidity among banks.

While operating costs remain elevated, analysts note that banks have become more cautious in their lending approach, focusing on quality borrowers and improving loan recovery strategies.

Asset Quality on the Mend

The Bank of Ghana’s report indicates that asset quality improved significantly year-on-year. The industry’s Non-Performing Loans (NPL) ratio fell to 20.8% in August 2025, from 24.3% in August 2024.

When adjusted for fully provisioned loan losses, the net NPL ratio improved further — from 10.6% in August 2024 to 6.8% in August 2025.

“The improvement in asset quality was broad-based with a decrease in non-performing loans in all economic sectors,” the Central Bank noted, adding that the trend reflected enhanced credit discipline and prudent write-off policies.

The decline in the NPL ratio was largely due to a 4.4% year-on-year contraction in NPL stock compared to a 10% growth in total loans, suggesting renewed lending momentum and risk moderation in the financial system.

Sector Breakdown and Credit Exposure

The industry’s NPL stock fell to GH¢19.8 billion in August 2025, down from GH¢21.1 billion in August 2024. This was driven by increased bad-loan write-offs, improved repayments, and a relatively stronger Ghana cedi during the review period.

The private sector, being the largest recipient of credit, continued to dominate the NPL portfolio, accounting for 97.4% of total non-performing loans by end-August 2025. The public sector’s share fell from 4.0% to 2.6% over the same period.

Banking Sector Stability Improving

The Bank of Ghana’s Monetary Policy Report for September 2025 also highlighted a strengthening Banking Sector Soundness Index, nearing pre-DDEP levels. This reflects improving solvency, strong earnings, and adequate liquidity positions across most banks.

Analysts believe that while the decline in bad loan write-offs is a positive signal, maintaining this trend will depend on sustained macroeconomic stability, enhanced supervision, and continued investment in credit risk analytics.

“The industry is showing signs of real recovery, but credit expansion to productive sectors must pick up to support the broader economy,” said one market watcher.

Source: Accra Business News