BoG Governor urges banks to enhance actual development after coverage charge lower

Introduction

The Governor of the Bank of Ghana (BoG), Dr. Johnson Asiama, has called on commercial banks to translate the recent reduction in the coverage charge into a measurable increase in credit provision, especially for small and medium‑sized enterprises (SMEs). This appeal follows the central bank’s decision to lower the coverage charge to 18 % and aims to stimulate genuine economic development across Ghana’s productive sectors. By emphasizing “real development,” the Governor seeks to shift the focus from merely adjusting macro‑prudential parameters to fostering tangible growth, job creation, and financial inclusion.

Key Points

Strategic Emphasis on SME Financing

Dr. Asiama highlighted that SMEs constitute the backbone of Ghana’s market system, accounting for a substantial share of employment and value creation. He urged banks to prioritize financing that directly supports these enterprises, arguing that targeted credit can accelerate private‑sector growth and improve overall economic resilience.

Link Between Policy Adjustments and Real‑Sector Impact

The Governor explained that easing the coverage charge is not an end in itself; it must be reflected in expanded loan portfolios for productive activities. He stressed that banks should view the lower charge as an opportunity to enhance their lending capacity without compromising prudential standards.

Promotion of Innovation and Digital Solutions

Dr. Asiama encouraged financial institutions to develop innovative products and leverage digital technologies to reach underserved populations. Such measures, he argued, are essential for achieving inclusive growth and ensuring that the benefits of policy reforms are widely distributed.

Collaboration Between Central Bank and Commercial Banks

A key theme of the engagement was the need for stronger partnership between the BoG and commercial banks. The Governor expressed confidence that coordinated efforts would amplify the impact of monetary policy, boost private‑sector development, and improve the stability of the financial system.

Background

In December 2025, the Bank of Ghana announced a reduction of the coverage charge from its previous level to 18 %. The coverage charge is a levy applied to certain banking transactions that the central bank uses to manage liquidity and regulate credit growth. Lowering this charge is intended to reduce the cost of funds for banks, thereby encouraging them to extend more credit to the real economy.

Historically, Ghana’s banking sector has faced challenges in providing adequate financing to SMEs. According to the World Bank’s 2024 “Doing Business” report, access to formal credit remains a significant constraint for small businesses, especially in rural areas. The BoG’s policy shift is a direct response to these structural bottlenecks.

Dr. Johnson Asiama, who assumed the role of Governor in early 2024, has a background in monetary policy and banking supervision. His public statements consistently underline the importance of aligning macro‑prudential tools with development objectives, a stance that differentiates his approach from previous administrations.

Analysis

Economic Rationale Behind the Coverage Charge Reduction

Reducing the coverage charge serves two primary purposes. First, it lowers the marginal cost of holding liquid reserves, freeing up capital that banks can allocate to lending. Second, it signals the central bank’s commitment to a more accommodative monetary stance, which can boost investor confidence and stimulate private investment.

However, the effectiveness of this measure depends on banks’ willingness to pass on the cost savings to borrowers. If banks retain the liquidity gains for profitability or capital adequacy purposes, the intended stimulus to credit growth may be muted.

Potential Impact on SMEs

SMEs in Ghana often rely on informal financing or high‑cost commercial loans. A modest reduction in borrowing costs could enable them to invest in inventory, expand operations, or adopt new technologies. Empirical studies by the African Development Bank (2023) suggest that a 1 % decrease in interest rates can increase SME investment by up to 2 % in emerging markets, indicating a positive elasticity that may be replicated in Ghana.

Risk Considerations

While encouraging credit expansion is desirable, the central bank must monitor emerging risks. Rapid credit growth without adequate risk assessment could lead to asset‑quality deterioration, especially if borrowers’ cash‑flow projections are overly optimistic. The BoG has indicated that it will maintain supervisory vigilance and may adjust other macro‑prudential instruments if necessary.

Role of Digital Innovation

Dr. Asiama’s call for innovative products aligns with global trends toward fintech integration. Mobile money platforms, digital lending algorithms, and partnership models with telecommunication firms have already improved financial access in several African jurisdictions. By supporting such innovations, banks can reach previously excluded segments, thereby enhancing financial inclusion metrics.

Practical Advice

For Commercial Banks

1. Re‑evaluate Credit Portfolios: Conduct a targeted audit to identify sectors where credit exposure is below potential and prioritize SME lending.
2. Optimize Funding Costs: Leverage the lower coverage charge to negotiate more favorable terms with the BoG and pass on savings to customers through reduced interest rates or fees.
3. Invest in Technology: Deploy scalable digital platforms that enable quick credit assessment, disbursement, and repayment monitoring for small businesses.
4. Strengthen Risk Management: Implement robust credit scoring models that incorporate alternative data (e.g., utility payments) to expand access while maintaining asset quality.
5. Engage with Stakeholders: Collaborate with industry associations, development agencies, and local governments to design sector‑specific financing solutions.

For Policy Makers and Development Partners

Support the BoG’s initiative by providing complementary measures such as guarantee schemes for SME loans, capacity‑building programs for bank staff, and incentives for banks that achieve measurable inclusion targets. A coordinated policy package can amplify the intended impact of the coverage charge reduction.

FAQ

Conclusion

Dr. Johnson Asiama’s appeal marks a pivotal moment in Ghana’s monetary policy landscape. By urging banks to convert the reduced coverage charge into concrete credit expansion for SMEs and other productive entities, the Governor seeks to align macro‑prudential policy with tangible development outcomes. Success will depend on banks’ readiness to embrace innovative financing models, the central bank’s vigilant supervision, and supportive interventions from development partners. If implemented effectively, the initiative could enhance financial inclusion, stimulate job creation, and accelerate Ghana’s broader economic transformation.