Banking Sector’s Non-Performing Loans Surge to GHS 20.4 Billion in June 2024, Says Bank of Ghana
The Bank of Ghana (BoG) has reported a significant increase in Non-Performing Loans (NPLs) within the banking sector, which grew by 49.4% year-on-year to GH¢20.4 billion as of June 2024, up from GH¢13.7 billion in June 2023. This rise underscores a deterioration in both domestic and foreign currency-denominated loans.
According to the BoG’s latest Monetary Policy Report, the banking industry’s NPL ratio rose sharply to 24.2% in June 2024, compared to 18.7% in the previous year. Even after adjusting for fully provisioned loan losses, the NPL ratio increased to 10.8%, up from 7.8%, driven by a broad-based rise in non-performing loan categories.
The central bank explained that the rise in the NPL ratio was due to the faster growth in the stock of bad loans relative to total loans issued during the period.
Private Sector Dominates NPLs
The private sector, the largest borrower from the banking sector, contributed the most to the rising NPLs. Its share of NPLs increased slightly to 95.6% in June 2024, from 95.5% a year earlier, while the public sector’s share declined marginally to 4.4%.
Sectoral Breakdown of NPLs
The agriculture, forestry, and fishing sector experienced the highest NPL ratio, surging to 56.4% from 30.0% in June 2023. Similarly, the transportation, storage, and communication sector saw a substantial rise in its NPL ratio to 49.1%, up from 22.1%.
Other sectors also reported increases, with construction at 36.8% (up from 32.8%) and electricity, water, and gas at 20.6% (up from 7.8%). The commerce and finance sector remained stable with an NPL ratio of 20.2%.
In contrast, the mining and quarrying sector recorded the lowest NPL ratio, which increased only slightly to 13.7% from 12.7% a year earlier.
This growing burden of non-performing loans points to asset quality challenges in Ghana’s banking sector, with particular pressure on industries such as agriculture and transportation.
