The Bank of Ghana (BoG) is proposing a Credit Risk Management Directive that would require regulated financial institutions to strengthen their assessment of borrowers' repayment capacity and improve the management of credit risks. The central bank is seeking to address persistently high borrowing costs.
The BoG has issued the draft to solicit comments and inputs from the banking industry and the general public, and it is open for comment until 30 November. It seeks to establish common standards for credit underwriting, portfolio monitoring, early identification of troubled loans and adequate provisioning. It covers commercial banks, savings and loans companies and community banks.
INCOME AND CASH FLOW OVER COLLATERAL
Under the proposed framework, lenders would be required to place greater emphasis on borrowers' income and cash flows when assessing loan applications, rather than relying excessively on collateral.
The central bank said the directive would strengthen credit discipline, protect the financial system from a build-up of non-performing exposures and support timely supervisory intervention. It added that the directive would provide a consistent baseline for prudent credit underwriting, ongoing credit portfolio monitoring, early identification of problem exposures, and adequate provisioning and reserves.
LENDING RATES LAG BENCHMARK CUTS
Average commercial bank lending rates fell from 20.58 percent at the beginning of 2026 to 15.94 percent by mid-October. Over the same period, the Ghana Reference Rate (GRR) declined from 15.68 percent to 10.04 percent, while the Monetary Policy Rate (MPR) fell from 15.50 percent to 14 percent.
The reduction in benchmark rates has not translated uniformly into cheaper credit. Banks continue to account for default risks, funding expenses, operational costs, capital requirements and liquidity conditions when pricing loans, and lending rates on certain SME facilities still exceed 30 percent.
High credit risk remains a major factor influencing lending rates, particularly for small and medium-sized enterprises (SMEs). Many of them lack substantial collateral, audited accounts and reliable financial records.
NON-PERFORMING LOAN TARGET AND CURRENT RATIO
The initiative comes as the central bank seeks to reduce commercial banks' non-performing loan (NPL) ratios to no more than 10 percent by the end of 2026. Ghana's NPL ratio stood at 15.7% in August 2026, down slightly from 15.9% in the previous month.
POLICY TRANSMISSION CONSTRAINTS AND OUTLOOK
The BoG has acknowledged that weak borrower information, limited formal financial records and difficulties enforcing collateral constrain the transmission of monetary policy to lending rates. It expects sustained macroeconomic stability, stronger credit information systems and improved collateral enforcement to help reduce these constraints over time.
Related: Bank of Ghana proposed 100% liquidity coverage ratio for licensed banks