Finance and tax analyst Nelson Cudjoe Kuagbedzi has expressed confidence that banks can meet the Bank of Ghana’s directive to reduce non-performing loans (NPLs) to below 10 percent by the end of 2026, describing the target as both achievable and essential for safeguarding financial stability.
The Bank of Ghana (BoG) recently instructed banks to lower their bad loan ratios to less than 10 percent by December 2026 as part of broader efforts to improve asset quality, strengthen the resilience of the banking sector and expand credit to the private sector.
The central bank has also warned that banks failing to meet the target could face regulatory sanctions, including restrictions on dividend payments and the payment of bonuses.
Speaking in an interview, Mr. Kuagbedzi said reducing bad loans is critical because of the banking sector’s central role in financing economic activity.
According to him, although the industry’s NPL ratio remains elevated at about 15 percent, it has recorded significant improvement from previous levels of around 20 percent, demonstrating that the sector is already moving in the right direction.
“The banking sector is the engine that fuels the economy. Therefore, if you have a banking sector with high non-performing loans, it is a source of concern. Currently, non-performing loans stand at about 15 percent, which is a reduction from the previous high of about 20 percent,” he said.
Mr. Kuagbedzi believes the central bank’s deadline is realistic, noting that banks have had sufficient time to prepare following sustained regulatory engagement, while some institutions have already achieved the required threshold.
“I think the timeline is achievable, given the fact that the Bank of Ghana informed industry players well in advance about reducing their non-performing loans to about 10 percent. If you check the second-quarter financial statements of the banks, some of them have already met this target set by the Bank of Ghana,” he stated.
He further argued that improving asset quality will deliver broader benefits to the economy by strengthening banks’ balance sheets, improving profitability and creating greater capacity for lending to businesses and households.
Lower non-performing loan ratios, he explained, reduce credit risk, improve investor and depositor confidence, and enhance the overall resilience of the financial sector, positioning banks to play a more effective role in supporting private sector growth.
“Low non-performing loans improve credit conditions. They also ensure higher profitability for the banks themselves, a stronger financial sector and steady credit growth to the private sector,” he added.
The Bank of Ghana’s directive forms part of its broader regulatory agenda to reinforce banking sector resilience following recent macroeconomic challenges.
The sustained reductions in bad loans will be crucial to restoring confidence in the financial system, lowering lending risks and improving access to credit for businesses, particularly as the economy continues its recovery.
