High NPLs 'scare' banks from lending to businesses

Despite a significant drop in lending rates, commercial banks have become wary of lending due to high non-performing loans (NPLs) in the sector, President-Ghana Association of Banks (GAB) John Awuah has said.

He argued that Ghana has the highest NPLs ratio in the West African sub-region, hovering around 19 percent.

This, he noted, forces banks to take a defensive posture toward individuals and businesses; demanding stringent conditions that preclude SMEs from accessing credit.

“For every GH¢100 you lend of depositors’ money, you are potentially going to lose GH¢19,” he explained. “The credit culture is bad. There’s default everywhere – from individual level to household to business.”

Awuah further noted that an efficient credit system requires more than just willing lenders, calling for deeper collaboration with state institutions. “If we work well together, we will bring the default rate down,” he said.

He made these remarks at a high level meeting with the Ghana National Chamber of Commerce and Industry (GNCCI) in Accra. The meeting was convened by the Chamber to discuss access to credit.

Speaking at the meeting, the President of GNCCI, Stephane Miezan, said the business community has yet to reap benefits from aggressive Bank of Ghana (BoG) policy rate cuts, as members of the Chamber still struggle in circumventing barriers to access credit.

The business leader intimated that if interest rates are low but businesses cannot access loans, then credit is equally expensive. He revealed that small- and medium-sized enterprises (SMEs) still go through a tortuous loan application process, despite the drop in interest rates.

“We keep saying that if interest rates go down and you can’t access loans, then it’s equally expensive,” he told journalists.

Lending rates have dropped to their lowest in recent years following BoG’s aggressive policy rate cuts. The central bank continued a streak of policy rate easing for four consecutive sessions – since July 2025 into 2026.

It slashed the benchmark rate by 300 basis points from 28 percent to 25 percent in July 2025, marking the first major easing since the economic crisis of 2022.

It has since maintained that cautious yet aggressive posture into 2026, following a sustained trend of disinflation. As inflation continues to tumble, BoG has cut the rate down to 15.5 percent in January this year. Inflation for the month of February stood at 3.8 percent.

On the other hand, the Ghana Reference Rate, which commercial banks base to fix their interest rates, has also dropped significantly. It plummeted from 29.96 percent in February 2025 to 14.58 percent in February 2026. Financial analysts predict lending rates to continue falling.

Despite these trends of gradual easing in finance costs, Miezan insisted that barriers to finance access still persists and continue to bite the business community.

High collateral requirements, prolonged approval periods, high rejection rates for small- and medium-sized enterprises – especially in manufacturing and value addition – are among barriers the Chamber seeks to resolve.

Some members of the Chamber narrated their experiences in unsuccessfully attempting to access finance from commercial banks. They therefore recommended that banks’ loan approval units be decentralised to speed up delivery and improve access. They further asked that loan application systems be digitised and set a well-defined time-frame for approval.

They also urged banks to design tailor-made products that spur growth in the country’s ailing manufacturing sector.

Reacting to the concerns, Awuah expressed his outfit’s commitment to helping resolve issues that are in the purview of its members, promising to forward their recommendations in writing to the banks.

Responding to claims of excessive collateral demands – with many business owners accusing banks of greed. Awuah clarified that the requirement for collateral coverage of up to 120 percent is driven by regulatory provisions and not determined at the discretion of individual banks.

“It’s a requirement of law. If you want a secure facility then by law the banks must have a collateral coverage of at least 120 percent,” he explained, while emphasising the need for communication to create awareness about bank processes.

“As banks, we need to communicate a lot more,” he stressed.

He urged businesses to explore specialised funding sources, particularly green finance, which could offer even lower rates than traditional banks.