Ghana Banking Sector: GH¢893m Loan Write-Offs Mark Improved Asset Quality in H1 2025

Introduction: Understanding the Half-Year 2025 Banking Landscape

In a notable development for Ghana’s financial sector, banks collectively wrote off GH¢893 million in non-performing loans (NPLs) during the first half of 2025. This represents a 14.8% decrease compared to the GH¢1,048 million provisioned in the same period in 2024, signaling a gradual improvement in credit risk management. The decline aligns with broader efforts to stabilize the banking industry amid global economic headwinds. This article dissects the trends, drivers, and implications of these write-offs, offering insights into sector resilience and future outlook.

Why Loan Write-Offs Matter for Economic Stability

Loan write-offs, such as the GH¢893 million recorded in 2025, reflect banks’ attempts to clean their portfolios of high-risk assets. This practice helps institutions recover financially while reducing systemic risks. By examining this data, stakeholders can gauge the health of Ghana’s credit system and its capacity to weather economic shocks.

Analysis: Key Drivers Behind the Decline in Bad Loans

The reduction in NPLs (from 24.2% in H1 2024 to 23.1% in H1 2025) suggests a narrowing of credit risks. However, the sector still holds GH¢20.7 billion in NPLs, a 1.3% increase year-on-year. This paradox—declining ratios but rising absolute numbers—requires scrutiny. Let’s break down the contributing factors:

Mortgage Sector: The Largest Drag on Lenders

Mortgage-related defaults dominated the write-offs, with financial institutions allocating significant provisions to address deteriorating collateral values and delayed repayments. This trend mirrors global banking patterns, where real estate distress often precedes systemic crises. For Ghana, urbanization and infrastructure-driven lending have left banks vulnerable to market shifts.

Sector-Specific Shifts in NPL Distribution

The private sector remains the primary source of problematic loans, accounting for 96.4% of NPLs—a slight rise from 95.6% in 2024. Meanwhile, the public sector’s share dipped to 3.6%, reflecting improved government debt management. Notably, the agriculture and trade sectors saw worsening NPL ratios, signaling sector-specific vulnerabilities that warrant targeted intervention.

Impact of Exchange Rate Volatility

Currency fluctuations, particularly against the USD, exacerbated defaults in foreign exchange-denominated loans. Banks face dual challenges: managing local currency declines while adapting to stricter cross-border lending policies. This underscores the need for robust currency risk management frameworks.

Summary: Half-Year 2025 Banking Highlights

Ghana’s banking sector demonstrated incremental progress in 2025, with reduced write-offs and improved NPL ratios. However, the absolute growth in NPL inventory highlights persistent risks. Mortgage defaults remain a critical pain point, while sectoral disparities indicate uneven credit demand. Stakeholders must remain vigilant to avoid complacency as global economic pressures linger.

Key Points: Critical Statistics and Takeaways

• GH¢893 million in loan write-offs during H1 2025 (14.8% down from 2024).
• NPL ratio improved to 23.1% (from 24.2%), with fully provisioned portfolios adjusting inventory cost (8.5% NPLs vs. 10.8%).
• Private sector NPLs rose to 96.4%, driven by trade and agriculture sectors.
• Foreign exchange exposure contributed to cross-border loan defaults amid currency pressures.
• Bank of Ghana reports improved asset quality but calls for sustained risk mitigation.

Practical Advice: Navigating Risks in Ghana’s Credit Landscape

Banks and borrowers alike can adopt strategies to navigate these challenges:

For Financial Institutions

• Diversify Portfolios:
• Collateralize Risky Loans:
• Leverage Technology:

For Borrowers and Businesses

• Prioritize Forex Reserves:
• Maintain Transparent Communication with Lenders:

Points of Caution: Pitfalls to Watch

While the data is promising, stakeholders must consider potential risks:

1. Rollover Concerns:

Write-offs may precede liquidity crises if banks overestimate recovery likelihood. Regulatory stress tests are critical to ensure robust capital reserves.

2. Economic Sensitivity:

A slowdown in Ghana’s GDP growth could reverse improvements, particularly in agriculture and trade sectors already strained by input costs.

3. Global Macroeconomic Spillovers:

Eurozone and U.S. monetary policies indirectly influence cross-border debts and remittances, exacerbating pressure on borrowers.

Comparison Dataset: NPLs Across 2023–2025

Comparing H1 2025 to earlier years reveals nuanced trends:

Positive Trajectories

• Reduction in forex-related defaults (-23.2% from 2024)
• Stabilization of bad loan inventories despite economic volatility

Persistent Challenges

• Slow growth in provisioning efficiency
• Sectoral imbalances (agriculture, trade)

Legal and Regulatory Implications

Under Ghana’s Banking Act and Bank of Ghana guidelines, write-offs must adhere to strict valuation standards. The reduction in NPLs could bolster regulators’ confidence, but misuse of provisions may lead to sanctions. Banks must ensure write-offs are backed by

Conclusion: A Cautious Path Forward

The decline in write-offs and NPL ratios reflects a maturing financial ecosystem, but lingering risks demand proactive management. Stakeholders must balance growth with prudence, leveraging innovation and regulatory alignment to sustain progress. For Ghana’s economy, a stable banking sector remains pivotal to achieving long-term development goals.

FAQs: Answering Common Questions

Why Are Banks Writing Off Loans?

Banks write off uncollectible loans to clean portfolios, reduce reported losses, and comply with conservatism principles. This practice, approved by regulators, aligns with International Accounting Standards.

How Will This Affect Borrowers?

Defaulted loan customers may face credit score damage or legal action. However, improved sector health could lead to better lending terms for compliant borrowers in future cycles.

What Role Does Forex Play?

Foreign exchange fluctuations impact debt servicing for businesses with external loans. Banks advise businesses to hedge currency risks during volatile periods.

Sources and References

1. MyJoyOnline.com – Life Pulse Daily Article

2. Bank of Ghana Public Reports (2024–2025)

3. Ghana Statistical Services Authority Macroeconomic Indicators

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