BoG Praised for Tightening Credit Controls as Loan Growth Surges Under Falling Interest Rates

The Bank of Ghana (BoG) has been commended for taking proactive steps to safeguard the banking sector against a potential rise in non-performing loans (NPLs) as declining interest rates encourage banks to expand lending.

Head of Trading, Global Markets at Absa Bank Ghana, Andrews Akoto, believes rapid credit expansion could expose banks to higher credit risk if proper lending standards are not maintained — a concern the central bank has already moved to address through stricter credit‑quality measures.

Speaking on Channel One TV’s Quarterly Economic Outlook, he said: “With regard to credit quality, I think the Bank of Ghana has done a lot with that. They have been very proactive. Last year in August, they set a target for non-performing loan ratios.”

Akoto noted that while the current low-interest-rate environment is expected to accelerate credit growth and improve access to finance — especially for SMEs — it also presents risks if banks pursue aggressive loan growth without proper due diligence.

“Essentially, with the lower interest rates, this is very accommodative, and so there will be a lot of loan growth that the banks are postured for. You would see the banks out there actually trying to write more loans,” he said.

He added that the BoG’s measures will help ensure that increased lending supports sustainable economic growth without undermining financial sector stability.

“So for the banks, they now have a constraint. Even as they are expanding credit to the private sector, they are to finance the most viable ideas and make sure they don’t run into a problem where they lend wily-nilly and when the credit cycle turns, they are in trouble again,” he explained.

Interest rates fall, credit demand rises

Borrowing costs continue to decline following the Bank of Ghana’s monetary easing cycle — a development expected to stimulate private sector investment and business expansion.

Latest BoG data show that non-performing loans rose marginally to 18.7% in February 2026, from 17.9% in January, after ending 2025 at 18.9%. Despite the slight monthly uptick, asset quality has improved significantly compared to a year earlier, reflecting continued progress in cleaning up banks’ loan books.

At the same time, average lending rates eased to 16.33% in April 2026, down from 20.58% in January, creating a more supportive environment for private sector borrowing.

The Bank of Ghana is targeting a further reduction in the industry’s NPL ratio to 10% by the end of 2026 to strengthen financial sector resilience, improve asset quality and sustain confidence in the banking system.