'Align loan repayments with farm cash flows' - BoG Governor tells banks

The Bank of Ghana (BoG) has called on banks to expand credit access to small and medium-sized enterprises (SMEs) in the agricultural value chain, as private-sector lending rebounds strongly on the back of easing financial conditions and improving macroeconomic stability.

Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, said the improvement in economic conditions must now translate into broader access to financing, particularly for agricultural businesses that continue to struggle to secure bank credit despite growing demand for loans.

Private-sector credit expanded by 41.2% in June 2026, sharply higher than the 8.6% recorded a year earlier, while real private-sector credit growth stood at 34.1%, signalling a significant recovery in lending activity.

However, Dr Asiama said many SMEs, particularly those operating along the agricultural value chain, remain constrained by banks’ perception that their businesses carry relatively high credit risks.

“As banks, you are not merely financial intermediaries; you are important business partners in the growth and transformation of the economy,” Dr Asiama told chief executives and heads of banks at the post-Monetary Policy Committee engagement in Accra.

He consequently called for a change in the way banks assess and structure financing for agriculture, particularly where conventional loan repayment arrangements fail to account for the seasonal nature of production.

“This should include developing innovative and flexible credit products that recognise the seasonal nature of agricultural activities and align loan repayment schedules with the timing and pattern of borrowers’ cash flows,” the Governor said.

Dr Asiama said such an approach would enable SMEs to obtain financing on terms that better reflect the realities of their operations, while helping banks manage risk more effectively.

He said improved access to financing should ultimately ensure that the gains from the stronger macroeconomic environment feed into broader economic activity and job creation.

The banking sector’s Capital Adequacy Ratio rose to 20.4% in June 2026 from 10.6% in June 2025, indicating a substantial improvement in banks’ capital buffers over the period.

Asset quality has also improved, with the industry’s Non-Performing Loan (NPL) ratio declining to 16.1% from 23.1% over the same period. Total banking-sector assets increased by 30.7%, supported mainly by growth in deposits and shareholders’ funds.

The stronger capital position and improvement in asset quality provide a more supportive backdrop for lending, although the central bank’s focus on agriculture suggests that the distribution of the credit recovery across sectors remains an important consideration.

Financial conditions have also eased significantly. The BoG said interest rates have continued to moderate across various segments of the money market, with the easing beginning to translate into stronger credit flows to the private sector.

The lending recovery comes amid a sharp decline in inflation and relative stability in the foreign exchange market, two factors that have helped improve the operating environment after earlier periods of elevated price and financing pressures.

Headline inflation declined to 4.6% in July 2026 from 5.3% in June, reflecting slower food inflation and a relatively stable exchange rate, which helped contain imported price pressures. Inflation is now below the floor of the central bank’s medium-term target band of 8±2%.

Economic activity has meanwhile remained resilient. Real Gross Domestic Product (GDP) expanded by 6.4% in the first quarter of 2026, compared with 6.2% during the corresponding period of 2025, driven largely by services and industry.

The BoG’s Composite Index of Economic Activity also points to sustained and broad-based momentum, while its confidence surveys show improved consumer and business sentiment, supported by expectations of growth, subdued inflation and declining lending rates.

Agricultural enterprises typically operate around production and harvesting cycles, making the timing of cash flows an important consideration in structuring loans. The Governor’s proposal would require lenders to factor those cycles more closely into credit assessment and repayment arrangements rather than applying lending structures that may not match when agricultural businesses generate income.

Dr Asiama said the current economic environment presents both an opportunity and a responsibility for the banking industry, with financial institutions now better positioned to translate the gains made in restoring stability into tangible benefits across the economy.

“The progress we have made provides a solid foundation for sustainable economic growth,” he said, adding that banks are well positioned to play a central role in translating those gains into benefits for businesses, households and the broader economy.

The Governor assured the industry that the BoG would continue to provide the regulatory and policy environment needed to support a sound, resilient and growth-oriented banking sector, while engaging financial institutions to address emerging challenges and unlock new opportunities.