High non-performing assets in the banking sector from 2014-2024: Causes, consequences, remedies and policy recommendations

By Dr Richmond Akwasi ATUAHENE

The main purpose of this paper is to present literature review of studies on the determinants of non-performing loans (NPLs) in the Ghanaian banking sector published over the period 2014–2024.

This study also investigates the causes. consequences, remedies and policy interventions of non-performing loans (NPLs) in the Ghanaian banking sector, examining the non-payment due to contractors, and IPPs, bank-specific factors macroeconomic variables and industry factors.

At end-December 2024, the sector had an estimated stock of arrears (“legacy debt”) of US$2.1 billion or 2.8% of GDP (included in the debt perimeter of the DSA) to IPPs and private fuel suppliers while government owed to GHS 35 billion or 5.8% of GDP to road contractors and other service providers.

Non-Performing Loans (NPLs) are a critical measure of financial health, affecting bank profitability, stability, and investor trust.

One of the major challenges before the Ghanaian Banking system is to address the NPL issue properly. Needless to say that the NPL issue, if not addressed properly, may affect both solvency and profitability of banks and growth prospects in future.

Non-performing assets (NPLs) pose a significant challenge to the Ghanaian banking sector, impacting negatively on financial stability, banking solvency and profitability, economic growth, and social welfare.

According to IMF and Bank of Ghana available data for the period under review 2014-2024 clearly showed that the lowest NPL ratio was recorded at 2014 was 11% while the highest point of NPL ratio was also recorded at 2017 was 22.70% with average for the eleven -year period stood at 17.13% far more exceedingly above the international best practices level of 10% by Demirguc-Kunt and Detriagache (1998).

The results suggested that high non-performing loans erupted when the macroeconomic environment was weak, particularly when growth was low and inflation was high. Also, high real interest rates were clearly associated with banking sector non-perform loan problems.

The prevalence of NPLs was influenced by a combination of government arrears due to contractors and IPPs, macroeconomic conditions, borrower behavior, and institutional shortcomings. Economic factors such as rising interest rates, inflation, and recessions increase default risks, while internal banking practices, including poor risk assessment and high operational costs, exacerbated the problem

This research paper explores the causes, consequences, remedies and policy recommendations of NPLs in the Ghanaian banking sector. Non-payment of contractors’ debts, Non-payment of energy debt, 2017-2018 banking crisis, 2022-2023 domestic debt exchange, economic downturns, high fiscal deficits, lax lending practices, and regulatory bottle necks had contributed to the accumulation of NPLs. The consequences of high levels of NPLs include reduced Banks and SDIs solvency, bank profitability, constrained credit availability, and social distress.

Regulatory interventions, legislative reforms, and proactive measures by banks are crucial in addressing NPLs. In summary, NPLs affect banking industry stability, loan growth and economic performance in Ghana.

The outlook for NPLs depends on government plans to repay contractors and IPPs on time, regulatory reforms, stable macro-economic environment, and mark improvement to legal and judicial process for debt recovery process in the country.

By implementing effective remedial measures, repayment measures, stakeholders can mitigate the adverse effects of non-performing assets (NPAs) and support the long-term health and stability of the banking sector in Ghana.

Key words: Non-performing Assets; Banking Sector; Government; Banks &SDIs; Macro-economic factors; Banks’-specific factor and Industry factors.

1.0 Introduction

The banking sector is a keystone to any financial system. The smooth functioning of the banking sector ensures the healthy condition of an entire economy. In the process of accepting deposits and lending, loans banks create credit. The funds received from the borrowers by way of interest on loan and repayments of principal are recycled for raising resources. Non-Performing Loans (NPLs) are a critical measure of financial health, affecting bank profitability, stability, and investor trust.

Non-Performing Loans (NPLs) are a critical metric for assessing the financial health of banks, reflecting the quality of their loan portfolios and exposure to financial risk. Recognizing the significance of banks in the national economy and acknowledging that lending risk poses a substantial threat to banks, it becomes crucial to examine the NPL factors.

A rise in NPL may prompt banks to increase their lending rates to offset the reduction in profits. While this action could decrease the NPL ratios that impede lending conditions for banks, it might adversely impact sectors in need of funds. Therefore, it is essential to analyze different factors, such as government arrears due to contractors and IPPs, bank-specific, macroeconomic factors and industry factors, providing crucial insights for Banks and SDIs, for Bank of Ghana the regulator and supervisor.

The significance of understanding the determinants of NPL lies in the potential to identify a set of warning indicators, enable timely intervention and minimize the likelihood and associated costs of crises. NPLs arise when borrowers fail to meet repayment obligations, leading to defaults that can severely impact a bank’s profitability, liquidity, and overall stability. (NPL) is a topic of great importance in the banking and finance literature.

A NPL is a loan in which the borrower has defaulted in making repayment of the principal and interest for a period of time usually 90 or 180 days (Farne and Vouldis, 2024). NPLs are mostly associated with banks which are deposit taking and lending institutions. Banks issue loans to credit worthy borrowers and expect borrowers to make repayment of the loan principal and interest at a specific period (Tolo and Viren, 2021). Borrowers may default on loan repayment.

When they do, the loan becomes non-performing. Bank NPL continues to attract the attention of bank managers, academics, economists, bank supervisors and financial regulators for seven reasons. One, a high level of NPL in the banking sector reduces the ability of banks to provide credit to the real economy to stimulate production and consumption towards economic growth. Two, NPL is procyclical with changing economic conditions.

However, building up of non-performing assets (NPAs) disrupts this flow of credit. It hampers credit growth and affects both solvency and profitability of the Banks and Specialized Deposit Taking Institutions as well. NPAs are the leading indicators to judge the performance of the banking sector.

IMF and Bank of Ghana available data for the period under review 2014-2024 clearly showed that the lowest NPL ratio was recorded at 2014 was 11% while the highest point of NPL ratio was also recorded at 2017 was 22.70% with average for the eleven -year period stood at 17.13% far more exceeding the international best practices of 10% by Demirguc-Kunt and Detriagache (1998).

Empirical literature by Ash Demirguc-Kunt and Enrica Detragiache (1998) opined that any country with ratio of non-performing assets to total assets in the banking system exceeded 10 percent that country banking sector is classified as a full-fledged crisis   and from the available data from IMF and Bank of Ghana over the period under review 2014-2024, Ghana’s banking sector could be classified as fully –fledged crisis.

Ghana’s high non-performing loan ratios over the period tend to occur in a weak macroeconomic environment characterized by slow GDP growth and high inflation; also, high real interest rates are typically associated with the emergence of banking sector problems.  These effects were impacted by the rate of currency depreciation and high fiscal deficit over the period.

As per Bank of Ghana (BoG) reports on December 2024, the non-performing asset ratio stood at 21.8%, which shows the severe impact it has on lending practices of banks and their liquidity positions. The country’s non-performing assets had deteriorated from 11% in 2014 to 21.8% in December 2024. This decline could be attributed to non-payment of contractors’ arrears, non-payment of energy debts by various governments, 2018 banking distress, 2022 domestic debt exchange, macro-economic challenges, banks’ specific factors and industry-specific factors have all contributed to the decline in the non-performing asset ratios in the Ghanaian banking industry.

Non-performing assets (NPAs) pose a significant challenge to the stability and growth of the Indian banking sector. According to the Bank of Ghana (BoG), NPLs are loans where the borrower has failed to make interest or principal repayments for a period exceeding 90 days. The magnitude of NPLs in the Ghanaian banking sector has been a matter of concern for policymakers, regulators, and stakeholders alike. As of 2024, NPLs in Ghana banks had been on the rise, reaching alarming levels.

Ghanaian banks have been grappling with high levels of non-performing loans, which have impacted their profitability and ability to lend. The total amount of NPLs across all banks in Ghana stood at approximately 21.8%, representing a substantial portion of the banking sector’s assets. The prevalence of NPLs in Ghanaian banks and SDIs can be attributed to various factors. Non-payment of government arrears due to contractors and energy service providers, macro-economic instabilities, banking crisis of 2018 and the 2022-2023 domestic debt exchange and subsequent slowdowns in the Ghanaian economy, have led to increased defaults by borrowers.

Additionally, lax lending practices and inadequate risk management by banks have contributed to the accumulation of non-performing loans. (NPLs). Moreover, legal and regulatory bottlenecks, including delays in the resolution of bad loans and deficiencies in bankruptcy laws, have hindered banks’ efforts to recover their dues. The consequences of high levels of NPAs are far-reaching.

They not only impair the financial health of banks but also have broader implications for the economy. Reduced profitability and capital erosion in banks constrain their ability to extend credit, which can hamper investment and economic growth. Furthermore, NPAs can lead to social distress, as they may result in job losses, particularly in sectors heavily reliant on bank financing.

The non-performing loans ratios for the past seven years, however,  the general uptick in non-banking sector  which had been attributed  partly to the financial sector clean up between 2017-2019, domestic debt restructuring in 2022 and harsh macro-economic downturn and macro-economic volatility with its higher interest rate, higher inflation, persistent depreciation of Cedi against the major trading currencies, terms of trade deterioration and non-payment of contractors and suppliers  by the  Ministries, Departments and Agencies on time.

Bank of Ghana Financial Stability Review (December 2024) revealed that Services, commerce and finance sectors accounted for the largest share of non-performing loans (NPLs) in the banking industry in 2024, underlining the persistent challenge of asset quality despite improvements in capital buffers and profitability across the sector. Together with the transport, storage and communication segment as well construction, the top four sectors contributed over 75 per cent of the industry’s impaired assets.

The services sector alone accounted for 26.27 per cent of total NPLs, followed by commerce and finance (23.23 percent), transport, storage and communication (14.35 percent), and construction (11.37 percent). Manufacturing and agriculture contributed 9.34 percent and 8.20 percent, respectively, with electricity, gas and water (2.48 percent) as well as mining (1.58 percent). The banking sector’s overall NPL ratio deteriorated from 20.58 per cent in 2023 to 21.8 per cent in 2024, on account of the lagged impact of macroeconomic headwinds, including the effects of the 2022 Domestic Debt Exchange Programme (DDEP).

Ghana’s banking industry is essential to the country’s economic growth, but despite reforms, it continues to face obstacles that threaten its stability and profitability, such as a high percentage of non-performing loans, inefficient credit distribution, and inadequate regulatory frameworks.

The Ghanaian banking industry has faced significant regulatory and supervisory challenges since 2014, primarily stemming from issues like non-payment of government debts to road contractors and IPPs, poor corporate governance practices in some Banks and SDIs weak risk management, macro-economic challenges and regulatory breaches. These challenges led to the collapse of several banks and the subsequent need for reforms to restore confidence and build a resilient financial system.

Despite efforts to recapitalize the sector after the banking sector crisis in 2018 and the DDEP in 2023 and the strengthen banking supervision, the banking sector had been bedevilled with higher non-performing assets in the Ecowas Sub-region.

Ghana has historically recorded high levels of nonperforming loans (NPLs) in the banking sector since 2014 NPL ratios have exceeded 10 percent over the past decade. The structurally high level of NPLs in Ghana could be explained by a range of factors, including government arrears creating debt repayment difficulties for domestic suppliers, macroeconomic volatility, poor credit risk management practices, and a legacy of problem loans that remain unresolved or are not written off partly because of weak legal systems.  The prevalence of non-performing loans (NPL) over the past decade.  This has been identified as a factor that limits the effectiveness of the banking sector in promoting the growth of the country.

Growing non-performing assets have been a recurrent problem in the Ghanaian banking sector was due to macroeconomic instabilities such as higher interest rates, higher inflation, unemployment, persistent depreciation of the local currency, high fiscal deficits and accumulation and non-payment of arrears due to contractors and service providers on time by the ministries, agencies and departments as well as bank specific factors including poor credit risk management, irresponsible lending, poor supervision and weak governance   poor underwriting skills, weak credit reference processes and weak understanding of the sectors where the banks were involved in lending, for example in the areas of financing the local buying agencies in the cocoa industry

Non-performing loans (NPLs) erode profitability and can threaten the solvency of banks, and when a sufficiently large volume of loans is affected, they can potentially threaten financial sector stability. However, building up non-performing assets (NPLs) disrupts this flow of credit. It hampers credit growth and affects the profitability and solvency of the banks as well. NPLs are the leading indicators to judge the performance of the banking sector. High ratio of non-performing loans to total loans impacts banks’ lending in several ways.

A bank plagued with a high stock of NPLs is likely to prioritize internal consolidation and improving assets quality over provision of new credit. A high NPL ratio requires greater loan loss provisions, reducing capital resources available for lending and denting bank profitability.  NPL is a major banking threat for almost every country in the world because they adversely affect the financial stability and profitability of the banking system. NPL can weaken the balance sheets of banks and other financial institutions, reducing their ability to lend and increasing the cost of borrowing. It can lead to a credit crunch, where businesses and individuals find it difficult to obtain financing, leading to a slowdown in economic activity.

The country’s government must spend inefficient tax money to save the banks and financial institutions from financial crises due to the high levels of non-performing loans (NPLs) in the banking sector. Such wasteful use of tax money restricts government spending on development and has unfavorable indirect effects on the entire economy. On the economic side, NPLs can have several negative effects. First, they can reduce credit avail- ability, making it more difficult for businesses to invest in new projects and expand their operations. It can lead to lower productivity and slower economic growth. Second, NPLs can reduce confidence in the financial system, leading to capital flight and further tightening credit conditions. Third, NPLs can lead to a loss of trust in the banking sector, which can reduce the willingness of individuals and businesses to save and invest, further slowing economic growth.

A significant increase in non-performing loans has frequently been linked to the occurrence of banking sector failure brought on by insolvency.  A major challenge facing the Ghanaian banking sector was the prevalence of non-performing loans (NPL) over the past decade.  This has been identified as a factor that limits the effectiveness of the banking sector in promoting the growth of the country.

Growing non-performing assets have been a recurrent problem in the Ghanaian banking sector was due to macroeconomic instabilities such as higher interest rates, higher inflation, unemployment, persistent depreciation of the local currency, high fiscal deficits and accumulation and non-payment of arrears due to contractors and service providers on time by the ministries, agencies and departments as well as bank specific factors including poor credit risk management, irresponsible lending, poor supervision and weak governance poor underwriting skills, weak credit reference processes and weak understanding of the sectors where the banks were involved in lending, for example in the areas of financing the local buying agencies in the cocoa industry. Other industry factors such as weaknesses in the legal, regulatory and judicial systems have all contributed to the uptick in non-performing loans in the banking sector over the past decade.

Protracted legal disputes, persistent adjournment in credit related cases by courts and weaknesses in the   Borrowers and Lenders Act 2020 (Act 1052).   Over the past decade, the macro-economic factors, bank specific factors and industry factors have all contributed the fully fledged banking crisis due to up-tick in the high non-performing loans in the banking sector Demirguc-Kunt and Detriagache (1998). The recent economic and financial crises have been the focus of the attention of professionals and academics due to their essential economic consequences.  These crises have arisen mainly due to the increase in NPL in the banking system since; by eliminating the structural profitability of banks, they are forced to limit credit in the system.

Financial entities that operate in stable, well-regulated markets and with acceptable levels of economic growth do not usually have high NPL rates. NPLs can have various causes, including the following factors: Economic downturns and fluctuations in interest rates can exert significant pressure on borrowers, making it increasingly challenging for them to fulfil their loan obligations. The main source of income of banks is through the interest earned on loans and advances and repayment of the principal. If such assets fail to generate income, then they are classified as non-performing loans (NPL).

The country’s non-performing assets had deteriorated from 11% in 2014 to 21.8% in December 2024. This decline could be attributed to non-payment of contractors’ arrears, non-payment of energy debts by various governments, 2018 banking distress, 2022 domestic debt exchange, macro-economic challenges, banks’ specific factors and industry-specific factors have all contributed to the decline in the non-performing asset ratios in the Ghanaian banking industry. Non-performing assets (NPLs) pose a significant challenge to the stability and growth of the Ghanaian banking sector. Over the June 2024 period, however, the rise in NPLs outpaced nominal credit growth and the NPL ratio increased to 24.1 percent at end-June 2024 (18.8 percent at end-June 2023). While NPLs are heterogeneously distributed across banks, the underlying trends reflect the 2022 economic downturn, the impact of exchange rate volatility as well as huge accumulation of government arrears due to IPPs, contractors and other service providers (IMF Country report, 24/334/2024)

According to the Bank of Ghana (BoG), NPLs are loans where the borrower has failed to make interest or principal repayments for a period exceeding 90 days. The magnitude of NPLs in the Indian banking sector has been a matter of concern for policymakers, regulators, and stakeholders alike. As of 2024, NPAs in Ghana banks had been on the rise, reaching alarming levels. The Ghanaian domestic banks including private owned banks and some SDIs have been grappling with high levels of NPAs, which have impacted their profitability and ability to lend to support the economic recovery. The total amount of NPAs across all banks in Ghana stood at approximately 21.8%, representing a substantial portion of the banking sector’s assets. The prevalence of NPAs in Ghanaian banks and SDIs can be attributed to various factors.

Non-payment of government arrears due to contractors and energy service providers, macro-economic instabilities, banking crisis of 2018 and the 2022-2023 domestic debt exchange and subsequent slowdowns in the Ghanaian economy, have led to increased defaults by borrowers. Additionally, lax lending practices and inadequate risk management by banks have contributed to the accumulation of NPAs. Moreover, legal and regulatory bottlenecks, including delays in the resolution of bad loans and deficiencies in bankruptcy laws, have hindered banks’ efforts to recover their dues. Ghana’s high NPL ratios have been shown to had deteriorated bank balance sheets, reduced credit growth, and delayed recovery after financial problems

2.0 Non-Performing Assets (NPLs): Concept and Classification

NPLs are defined and reported differently across countries. There is no

international standard of definition. In countries reporting financial soundness indicators (FSIs) to the IMF (2019), the FSI Compilation Guide recommends recording loans as nonperforming when (1) payments of interest or principal are past due by 90 days or more; or (2) interest payments equal to 90 days or more have been capitalized (reinvested into the principal amount), refinanced, or rolled over (payment delayed by agreement); or (3) evidence exists to reclassify them as nonperforming even in the absence of a 90-day past due payment, such as when the debtor files for bankruptcy or there are other

signs of significant financial difficulty of the borrower (IMF 2019a). Once a loan is classified as non-performing, it should remain classified as such until payments are received, or the principal is written off on this or subsequent loans that replace the original. Nonetheless, despite this broad guidance, important differences and discretion remain in the criteria and their implementation, making it difficult to compare NPL levels across countries and even among banks in the same country. Thus, cross-country and cross-region comparisons should be interpreted with caution, as countries may use different definitions and accounting norms.

 

The Basel Committee on Banking Supervision defines NPLs as when “a default is considered to have occurred concerning a particular obligor when either or both of the two following events have taken place. The obligor is past due more than 90 days on any material credit obligation to the banking group. Overdrafts will be considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than current outstanding”.  Non-performing assets (NPLs) are loans or advances extended by banks that have ceased to generate income for the lender. Ghana classifies loan assets into four grades of risk; standard, sub-standard, doubtful and loss. income may be accrued on them. remain unpaid for at least 90 days

In Ghana, NPLs are classified based on the duration for which the borrower has defaulted on repayment. According to the Bank of Ghana (BoG), loans where the interest or principal remains overdue for a period exceeding 90 days are categorized as NPLs. As of 2024, NPLs in the Ghanaian banking sector had been classified into various categories based on the severity of the default. Substandard assets are those where the borrower has defaulted for a period between 90 days and 12 months, while doubtful assets are those where the default extends beyond 12 months. Loans classified as loss assets are those where the bank anticipates no recovery, either in part or in full, and are deemed unrecoverable. The classification of NPLs is crucial for banks as it helps them assess the quality of their loan portfolio and allocate appropriate provisions to cover potential losses.

Provisions are set aside by banks to account for potential losses arising from NPLs, thereby safeguarding their financial stability, and ensuring compliance with regulatory requirements. The extent of NPLs in the Indian banking sector has been a matter of concern, with public sector banks bearing the brunt of the problem. As of 2024, domestic sector banks accounted for a significant portion of NPLs, reflecting issues such as poor lending practices, government arrears due to contractors and IPPs, inadequate risk management, and economic challenges. Addressing the issue of NPLs requires a comprehensive understanding of the underlying causes and effective measures to mitigate their impact. By classifying NPLs based on their severity and implementing prudentprovisioning norms, banks can better manage their asset quality and strengthen their resilience to economic shocks.

3.0 Causes of the High- Non-Performing Assets in the banking sector for the period 2014-2024

Ghana’s deteriorated macroeconomic environment has been associated with poor asset quality over the past eleven years. The causes of non-performing assets (NPLs) in the Ghanaian banking sector are multifaceted and stemmed from a combination of non-payment of arrears due to contractors and IPPs, macro-economic instabilities, bank-specific factors, industry specific issues and regulatory factors. These causes have contributed to the accumulation of NPLs, posing challenges to the financial health of banks and the stability of the banking system. The accumulation of nonperforming loans in the Ghanaian banking sector has been generally attributable to a number of factors, including non-payment of arrears due to contractors and IPPs, economic downturns and macroeconomic volatility, terms of trade deterioration, high interest rates, excessive reliance on overly high-priced interbank borrowings, insider lending and moral hazard. High NPLs had impacted negatively on credit to the private sector as a share of GDP is relatively low in Ghana compared to peer countries and has been declining over the past decade; and the lack of access to finance is often cited by the private sector as a key constraint to investment, particularly for small and medium-sized enterprises.

1. Government arrears to Contractors and IPPs

The recent IMF Country report 24/030 (01/2024) confirmed that the government had accumulated significant arrears in both energy and non-energy sectors in the past decade. The government had accumulated significant arrears in recent years. The stock taking exercise conducted by the authorities (structural benchmark) assessed an overall stock of arrears at end-2022 broadly consistent with initial program assumptions, with energy sector arrears amounting to some US$ 2.1 billion (2.8 percent of GDP) and non-energy sector arrears at about GHS 35 billion (5.8 percent of GDP). The government continued to accumulate payables during of the year, hence breaching the related program indicative target (IT). Non-energy sector payables declined, but energy sector payables increased due to low recoveries in the sector, tight financing conditions, and pending negotiations with Independent Power Producers (IPPs).

At end December 2024, NPLs were estimated at 21.8% and several banks, including systemically important domestic banks and subsidiaries of reputable international banks, reported higher NPL ratios in the range of 20–40 percent. The stock taking exercise conducted by the authorities assessed an overall stock of arrears at end-2024 broadly consistent with initial program assumptions, with energy sector arrears amounting to some US$ 2.1 billion (2.8 percent of GDP) and non-energy sector arrears at about GHS 35 billion (5.8 percent of GDP) and all energy sector and non-energy sector arrears had all translated into the higher non-performing loan ratios over the past decade (IMF Country report 24/030 (01/2024). There is a significant negative correlation between the government arrears due to road contractors estimated at GHC35 billion and IPPs (US$2.1 billion and the higher non-performing assets in the banking sector. At end-December 2023, the sector had an estimated stock of arrears (“legacy debt”) of US$2.1 billion or 2.8 percent of GDP (included in the debt perimeter of the DSA) to IPPs and private fuel suppliers.

The deceleration in growth also occurred mainly in the non-cocoa/gold sectors which constituted the bulk of the banks’ loan portfolios. This has added to NPLs and exposed weaknesses in loan underwriting standards. Ghanaian banking sector has been saddled with non-performing loans (NPLs) over the past decade, meaning that they were not able to recover loans they have provided to their customers. These have affected the ability of banks to generate income to operate their businesses. It also led to losses which eroded their capital base further. The accumulation of new arrears could compound the NPL problem and weaken banks. The government has continued to accumulate payables over the years. Meanwhile, high fiscal deficits over the years have compounded the NPL situation, as government arrears undermined the capacity of contractors to service their obligations to banks. The inability of government to make payments to contractors and other service providers on time and this in turn created NPLs across the banking system

1. Various macroeconomic determinants affect NPLs.

Ghana’s economic performance has been marked by significant volatility over the years. Episodes of strong growth and overall macroeconomic stability were undermined by rising inflation, exchange rate depreciation, and loss of external buffers, in turn largely reflecting overly accommodative fiscal policies. Most recently, severe external shocks compounded pre-existing fiscal and debt vulnerabilities, exacerbating such volatility and leading to acute economic and financial pressures in 2022. The economy, during the period of study, was characterized by large budget deficits, high inflation, higher interest rates, depreciation of the local currency, and low economic growth.

Ghana for the past three years has been classified as a hyperinflationary economy with three-year cumulative inflation for the country being 128%. (IMF World Economic Outlook 2023). Ghana has been on the hyperinflation watch list for a while. Effective 31 December 2023 the International Practices Task Force (IPTF) determined that with a 3-year cumulative inflation of 133% it is now there. The high degree of economic vulnerabilities negatively impacted the health of the financial sector in many ways. Macroeconomic instabilities over the past decade have impacted negatively on the financial sector. The rate of inflation remained high and volatile during much of the period 2022-2024.

The rate of depreciation of the local currency, the cedi, increased over the same period and the budget deficit situation has persisted. These unstable conditions impacted negatively on the mobilization of deposits and the financial depth of the economy.

The financial sector has not yielded the intended effects, primarily because of the lack of sustained improvements in the macroeconomic environment. However, weaknesses in the fundamental structure of the economy have also affected the outcome of financial sector reforms over the period 2019 -2023. High budget deficits led to increasing interest rates on government debt (Treasury Bills Market) reorienting credit away from the private sector to the government. The macroeconomic instabilities had negatively impacted banking capital and distorted banking operations. Higher inflationary tendencies continue to erode the real value of bank capital and quality of assets. Exchange rate instability and high levels of uncertainty negatively affected banking operations through unsustainable non-performing loan levels. Ghana’s economic downturns in 2022-2023 with its fluctuations in interest rates exerted significant pressure on borrowers’ that made it increasingly challenging for them to fulfil their loan obligations.

Notwithstanding upward pressures on food prices, inflation decreased from a peak of 54 percent in December 2022 to about 26 percent in November 2023. Following an uptick in food price inflation over the summer, it dropped to about 32 percent in November on the back of a good start in the agricultural season. The decrease in non-food inflation has been more pronounced, reflecting the impact of the monetary policy tightening. Inflation reached 23.8% by year-end 2024 driven by food prices and currency depreciation. The Cedi depreciated by 19.0% against the US dollar by end-2024 versus the previous year. The Ghanaian cedi depreciated steadily against the USD, moving from 5.5 GHS/USD in 2019 (with inflationary rate of 7.9%) to 5.76 GHS/USD in 2020 (with inflationary rate of 5.78). The exchange rate further declined to 6.0 GHS/USD in 2021(with inflationary rate of 12.6%).

A steep depreciation occurred between 2022 and 2023, with the exchange rate reaching 8.57 GHS/USD in 2022 (with inflationary rate of 54.1%) and 11.6 GHS/USD in 2023 (with inflationary rate of 43.7%), indicating severe currency instability, conceivably driven by cumulative inflationary pressures and weak macroeconomic fundamentals.  Inflation reached 23.8% by year-end 2024, driven by food prices and currency depreciation. The Cedi depreciated by 19.0% against the US dollar by end-2024 versus the previous year

Ghana maintained moderate inflationary rate from 7.9% in 2019 to 2021, with inflation rates hovering between 7.1% and 9.9%. Inflation surged dramatically to 54.1% in 2022, and although it eased slightly in 2023, it remained extremely high at 43.7%. This reflects significant price instability, primarily due to external shocks, currency depreciation, and supply-side disruptions. The main source of income of banks is through the interest earned on loans and advances and repayment of principal. If such assets fail to generate income, then they are classified as non-performing loans (NPL). High fiscal deficits over the period led to high interest rates and engendered a further deterioration in bank assets, profits, and capital. Growing non-performing assets have been a recurrent problem in the Ghanaian banking sector was due to macroeconomic instabilities such as higher interest rates, higher inflation, unemployment, persistent depreciation of the local currency, high fiscal deficits.  Higher Inflation in Ghana represented the general price increase over time, reducing currency purchasing power and thus affected borrowers’ real debt burden and repayment capacity.

According to Kjosevski et al. (2019), moderate inflation may reduce real debt values, facilitating repayment, while high inflation typically prompts central banks to raise interest rates, increasing debt servicing costs. Economic downturns and the banking crisis of 2018 and 2022-2023 domestic debt exchange subsequent slowdowns in the Ghanaian economy, have led to increased defaults by borrowers. These downturns have adversely affected various sectors, including manufacturing, infrastructure, construction, service and agriculture, leading to financial stress for borrowers and impairing their ability to repay loans. Additionally, inflation erodes real wages when not matched by nominal wage growth, diminishing borrowers’ repayment ability.

Therefore, inflation’s impact on NPLs depends on whether inflation is anticipated, wage practices are indexed, and fixed versus variable-rate loans within the banking system are predominant. Increasingly, macroeconomic instability in emerging market economies like Ghana, as well as in more mature industrial economies, has been associated with serious problems in the financial sector. The macroeconomic costs imposed by financial sector problems have been very large in terms of forgoing growth, inefficient financial intermediation and impaired public confidence in financial markets.  The high rate of inflation in 2022-2023 reduced the ability of debtors servicing the loans and thus increase NPL ratio 24% in June 2024 but declined to 21.8% in December 2024. A previous report that previous year’s inflation negatively and significantly affects NPLs in the Ghanaian banking industry.

iii…Bank of Ghana’s high policy rates and Lending Rates impacted on the NPLs

Bank’s lending behavior is also an important determinant of NPLs in Ghana. In particular, a tightening of lending conditions in the form of a 100 basis point increase in banks’ average lending rates1 (for example, following a monetary policy shock) has an immediate effect on systemwide.

Bank of Ghana’s higher policy rates over the past decade did influence commercial bank lending rates, which subsequently impacted negatively on credit quality through altered borrower behavior and selection mechanisms. This created a direct path for monetary policy that affected financial stability through NPL accumulation in Ghana Higher lending rates increased debt servicing costs for borrowers, thus strained their repayment capacity and elevating default probability.

The increased in the Bank of Ghana’s policy rates resulted with an increased lending rate, borrowers found it difficult to repay their loan principal plus the interest, exposed Banks and SDIs to high defaults resulted in the higher non-performing asset ratio in the banking sector over the past decade

1. Money Supply (M2)

Money Supply (M2) includes cash, checking deposits, and easily convertible near-money assets controlled by central banks through monetary policy instruments. M2 affected NPLs through its influence on credit availability, interest rates, and inflation. Rahman et al. (2018) found that increased M2 stimulates economic activity but encourages excessive lending and relaxed credit standards, elevating NPLs. Conversely, restrictive monetary policy increased borrowing costs, tightening financial conditions for existing debtors. Therefore, M2’s affected on NPLs varies across economic cycles, highlighting the mechanisms between monetary policy decisions and loan portfolio quality. Equally interesting is the relationship between broad money multipliers (M2) and nonperforming loans, and the potential association between banking crisis and domestic credit to the private sector.

1. Gross Domestic Product

GDP represents the total monetary value of goods and services produced within a country’s borders during a specific period. GDP growth influences NPLs by affecting borrowers’ income and debt servicing capacity. During the economic downturn 2022-2023 period, the restrictive monetary policy increased borrowing costs, tightened financial conditions for existing debtors. Therefore, M2’s effect on NPLs varies across economic cycles, highlighting the mechanisms between monetary policy decisions and loan portfolio quality.

1. High fiscal deficits over the period under review

The fiscal outturn for 2024 deteriorated, with primary and overall fiscal deficits exceeding targets at 3.7% and 7.7% of GDP, respectively, due to accumulating arrears and unbudgeted spending. Ghana’s fiscal deficits and its effects on price stability and output growth have been a major source of concern to various governments. In the past, Central Bank of Ghana, the private sector, civil society, domestic and international investors and other major international financial institutions like the IMF, the World Bank and Rating Agencies among others. Fiscal deficits picked up from 6.3 percent of GDP in 2015 to 7.8 per cent of GDP in 2016.

Though it declined to 5.9 percent of GDP in 2017 against a program target of 6.3 percent of GDP, it significantly ballooned again to 7.2 percent of GDP in 2018 against a revised program target of 4.4 percent of GDP in consultation with the International Monetary Fund. Various governments in the past including the current government had to deal with the negative the plaque of fiscal deficits financing and its negative consequences on other macroeconomic variables particularly on inflation in the Ghanaian economy.  The previous governments’ high fiscal deficits over the period had led to high interest rates and engendered a further deterioration in bank assets, profits, and capital.

The high fiscal deficits of 15.2% in 2020; 12.2% in 2021; 9.3% in 2022 and 7.7% in 2023 posed some challenges and prospects of creating the fiscal space in the near term are uncertain as the potential for expenditure overruns were high ahead of the 2016 and 2020 elections. Inability to reduce or contain fiscal deficits have compounded the legacy debt to non-energy and energy sectors that had negatively impacted on the non-performing loan ratios.

Ghana’s fiscal deficits and its effects on price stability and output growth have been a major source of concern to various governments in the past, Central Bank of Ghana, the private sector, civil society, domestic and international investors and other major international financial institutions like the IMF, the World Bank and Rating Agencies among others.  Fiscal deficits picked up from 6.3 percent of GDP in 2015 to 7.8 per cent of GDP in 2016. Though it declined to 5.9 percent of GDP in 2017 against a program target of 6.3 percent of GDP, it significantly ballooned again to 7.2 percent of GDP in 2018 against a revised program target of 4.4 percent of GDP in consultation with the International Monetary Fund. Various governments in the past including the current government had to deal with the negative the plaque of fiscal deficits financing and its negative consequences on other macroeconomic variables particularly on inflation in the Ghanaian economy.  According to IMF Country Report No. (11/131/2011) noted that high fiscal deficits have compounded the NPL situation, as government arrears undermined the capacity of contractors to service their obligations to banks in Ghana.

Covid 19 pandemic-induced defaults have added to legacy asset-quality issues linked to loss-making state-owned energy companies and bulk oil distribution companies that suffered from currency depreciation and delays in government payments to non-energy sector debts have all added to up-tick in the higher non-performing ratios over the past years. High and rising NPL ratios can severely limit the ability of the banking sector to provide new credit and support the economy. The high share of problematic loans in total loans relatively reflects in a negative way the overall tendency of the banks towards taking risks and credit growth. It reduces the profitability of the banking sector and increases the systemic risk as well.

The negative effect of NPLs on credit to the private sector is observed at both banking system and individual institution levels, with banks that hold large NPL portfolios providing on average fewer loans. The 2023 high fiscal deficit of 7.7 percent of GDP poses some challenges and prospects of creating the fiscal space in the near term bare uncertain as the potential for expenditure overruns are high ahead of the 2024 elections. For the government’s fiscal operations, the fiscal deficit-to-GDP stood at 5.2% in December 2024. The primary balance also stood at a deficit of 1.2% of GDP in December 2024.

4.0. Banking Distress 2017-2019

Between 2017 and early 2019, Ghanaian banks were recapitalized because of greater capital requirements and increased minimum necessary paid-up capital, while seven insolvent banks were closed. However, high NPLs have persisted. Because asset quality has deteriorated after2014, asset risks remain the most significant credit problem for Ghanaian banks. The reduction in non-performing loans in Ghanaian banks, which came because of a recent clean- up and recapitalization effort, is credit positive for Ghana’s banking sector and helps to maintain financial stability.

NPLs reached a high of 23.5 percent in April 2018 because of slow economic development and currency instability in 2015 and 2016, as well as vulnerabilities at the seven insolvent banks, which were preceded by fast loan growth and loose credit underwriting procedures. NPLs have been slowly improving since their high, dropping to 17.13% in October 2019 and 13.9 percent by December 2019, indicating a considerable acceleration in the downward trend but NPLs had subsequently increased from 20.8% in December, 2023 to 21.8% in December,2024.

5. Higher Public Debt from 2016-2023

Ghana’s high public debt over the period under review contributed the high non-performing assets in the banking sector. An increase in public debt was found to have led to higher NPLs. This may be because higher public debt increases the sovereign risk premium, affecting banks’ funding costs and lending rates. High public debt also increased the probability of government arrears accumulation, which translated into NPLs under period under review.

6. Domestic Debt Restructuring in 2022-2023

The domestic debt restructuring significantly and negatively impacted on banks’ balance sheets and financial sector stability. Financial institutions that participated in the Domestic Debt Exchange (DDEP) recognized significant impairment losses. This has contributed to reducing the overall capital adequacy ratio (CAR) of the sector, measured with Bank of Ghana (BoG) regulatory forbearance measures, from 19.4 in June 2021 to 14.2 percent in August 2023. Banks have so far not suffered from significant liquidity issues.

They posted robust profits during the first quarter of the year in part due to an increase in low-cost deposits that allowed for higher interest margins. However, the non-performing loans (NPLs) ratio increased from 14.1 percent in December 2022 to 18.7 percent in June 2023, on the back of the economic slowdown and the rise in interest rates. Growth in credit to the private sector has slowed down significantly—to about 10 percent year-over-year in August from over 50 percent in November 2022, affecting a large number of sectors.

The impact of large domestic debt haircuts to banks holdings of sovereign claims on banks’ capital adequacy and adversely affected their capacity to lend and dampen credit to the private sector and economic activities.

7. Banking Specific issues

Banking specific factors behind the high non-performing loans in the banking sector were inappropriate credit risk management, irresponsible borrowing, poor supervision, and weak governance.  Banks and other lenders’ related issues have contributed not in small ways to the higher non-performing asset ratio in the banking sector.

Financial institutions including banks were not immune to the NPLs related issues which included the presence of poor credit underwriting, weak credit reference procedures, inadequate and poor credit risk management including monitoring and recoveries procedures and processes have all resulted in the up-ticked in the recent NPLs data.

Bank lending and moral hazard. Banks with higher average interest rates on loans (measured as the ratio of interest income to gross loans) have higher NPL ratios, probably because of customers’ difficulty in repaying more expensive loans and adverse selection effects. Furthermore, issues within the banking sector have exacerbated the problem of NPLs. Lax lending practices, characterized by inadequate due diligence and risk assessment, have resulted in banks extending loans to borrowers with weak creditworthiness.

In some cases, loans have been granted based on collateral dubious value or without proper evaluation of the borrower’s repayment capacity, leading to higher instances of default. Moreover, weaknesses in risk management practices within banks have contributed to the escalation of NPLs. Inadequate monitoring of loan accounts, delay in recognizing signs of distress, and lack of timely intervention have allowed potential NPL accounts to deteriorate further.

Risk management frameworks within banks need to be strengthened to identify and mitigate potential credit risks effectively. Individual bank determinants that impact NPLs are bank-specific factors. These are internal factors, including credit portfolio size and composition, capital, interest rate policy, deposit liabilities, quality of risk level, bank size, and quality of board governance practices.

8.0 Banking industry specifics

Weaknesses in the legal, regulatory and judicial systems have all contributed to the uptick in non-performing loans in the banking sector over the past decade. Protracted legal disputes, persistent adjournment in credit related by courts and weaknesses in the   Borrowers and Lenders Act 2020 (Act 1052).  Protracted legal disputes on credit issues, difficulty in enforcing and executing collaterals through the court systems and compliance complexities have negatively impacted on the non-performing loans in the banking sector.

However, the Borrowers and Lenders Act 2020 Act 1052 has provided the legal framework for credit, improved the standard of disclosure of information for both lenders and borrowers but not included the legal rights for the lenders to dispose collateral used to support bank facilities without resorting to the courts.

Additionally, legal and regulatory bottlenecks have impeded banks’ efforts to address NPAs efficiently. Delays in the resolution of bad loans, due to lengthy legal proceedings and cumbersome debt recovery mechanisms, have prolonged the recovery process and eroded banks’ asset quality. Inadequate bankruptcy laws and insolvency procedures have hindered banks’ ability to enforce recovery of dues from defaulting borrowers.

9.0 Consequences of Non-Performing Loans in the Ghanaian Banking Sector.

The consequences of non-performing assets (NPAs) in the Ghanaian banking sector are profound, affecting not only the financial health of banks but also broader aspects of the economy and society. The escalating levels of NPAs have triggered a range of adverse effects, highlighting the urgent need for remedial action to mitigate their impact. Non-performing loans (NPLs) had eroded profitability and threatened the solvency of Banks and SDIs and as sufficiently large volume of loans had been affected on the period under review and threatened financial sector stability.

One significant consequence of high levels of NPLs is the adverse impacted on the profitability and stability of banks. NPLs had eroded banks’ income streams by reducing interest income and necessitating higher provisions for potential losses. As a result, banks experienced a decline in profitability, which also impaired their ability to generate capital and support lending activities.

Moreover, the prevalence of NPLs in the banking sector has broader implications for the economy, particularly in terms of credit availability and investment. Banks burdened with high levels of NPLs became risk-averse and cautious in extending credit, especially to sectors perceived as high-risk.

This constriction in credit flow stifled investment and economic growth, as businesses face difficulties accessing the necessary funds for expansion and innovation. Furthermore, the social consequences of NPLs cannot be overlooked, as they have repercussions beyond the financial realm.

High levels of NPLs could lead to job losses, particularly in sectors heavily reliant on bank financing, such as manufacturing, services and construction infrastructure. High concentration of non-performing loans has a negative impact on the economy, slowing down the creation of new credit and worsening market expectations.

The resultant layoffs and unemployment not only exacerbated social distress but also undermined consumer confidence and domestic demand, further dampening economic activity. Additionally, NPLs contributed to a loss of trust and confidence in the banking sector, both among investors and the public.

Instances of large-scale NPAs eroded the credibility of banks and raised questions about their governance and risk management practices. This loss of confidence could lead to capital flight, as investors seek safer avenues for their investments, thereby exacerbating liquidity pressures on banks and exacerbating the NPL problem. In summary, the consequences of non-performing assets in the Ghanaian banking sector extend far beyond financial losses, encompassing broader implications for the economy and society.

Addressing the NPL problem requires concerted efforts to restore the financial health of banks, stimulate credit growth, and mitigate the adverse social and economic impacts of NPLs. The high volume of NPLs in the Ghanaian banking sector had caused significant drag on bank financial performance in the form: (i) reduction in net interest income (II) increased in impairment costs (iii) additional capital requirements for high risk weighted assets (iv) lower ratings and increased cost of funding, adversely affected equity valuation, (v) reduce risk appetite for new lending and (vi) added management time and service costs to resolve the NPLs problem. High ratio of non-performing loans to total loans impacts banks’ lending in several ways.

A bank plagued with a high stock of NPLs is likely to prioritize internal consolidation and improving assets quality over provision of new credit. A high NPL ratio requires greater loan loss provisions, reducing capital resources available for lending and denting bank profitability. The credit granted to the private sector by commercial banks as share of GDP in Ghana stood at 9.13 percent in 2023

10.0.  Findings and Discussions

IMF Country report 24/030/01/2024) confirmed that the government had accumulated significant arrears in recent years. The stock taking exercise conducted by the authorities assessed an overall stock of arrears at end-2023 broadly consistent with initial program assumptions, with energy sector arrears amounting to some US$ 2.1 billion (2.8 percent of GDP) and non-energy sector arrears at about GHS 35 billion (5.8 percent of GDP) and all energy sector and non-energy sector arrears had all translated into the higher non-performing loan ratios over the past decade.

The government has continued to accumulate payables over the years. Meanwhile, high fiscal deficits over the years have compounded the NPL situation, as government arrears undermined the capacity of contractors to service their obligations to banks. Our results also have supported the view that macro-economic factors, bank-specific factors and industry characteristics had caused the high levels of non-performing loans in the Ghanaian banking sector over the past decade.

Nevertheless, the study found that stability risks had heightened considerably, with high non-performing loans (NPLs) and undercapitalized banks. The banking sector also faced several constraints, including a scarcity of long-term finance, limited access to financial services, and high intermediation costs. The vulnerabilities in the banking sector largely reflect pervasive state involvement and deficiencies in risk management, supervision, and the insolvency regime.

The results also suggest that NPLs to rise when the macroeconomic environment is particularly weak when growth is low, inflation is high. The macroeconomic environment has not been favourable for the banking industry over the past decade.  Though GDP growth has been relatively low, the fiscal position has deteriorated substantially, and the government had continued to incur domestic arrears that have underpinned the high NPLs across the industry. and with persistent depreciation of local currency against major trading currencies.

More recently, although the Bank of Ghana has been reducing the policy rate marginally and inflation has fallen to double digits, lending rates have been slow to respond largely due to: (i) high inflation expectations in the face of weak fiscal fundamentals; (ii) rigidities in the banks’ balance sheets; (iii) high operating costs; (iv) high cash reserve requirements including the recent increases; and (v) high NPLs and associated provisions. Any future macroeconomic shocks, such as fiscal shock or commodity prices shock to cocoa, gold or oil prices and inward remittances could pose a significant risk because of simultaneous impact on interest rates, exchange rate and asset quality.

The review showed that macroeconomic variables, which were found to have affected banks’ asset quality, included the persistent depreciation of the local currency, high interest rate, and high inflation. In this regard, exchange rate depreciation had a negative impact on asset quality, particularly in foreign owned banks with a large amount of lending in foreign currency to un-hedged borrowers, and interest rate hikes affect the ability to service the debt.

The current crisis highlights the importance of linking the macroeconomic conditions to the health of the banking system. In addition to macro-economic factors, many of these studies included bank-specific variables since they can signal or cause risky lending.  Bank-specific variables that have contributed to the higher non-performing loans in the banking sector were weak credit risk management, poor internal controls, connected lending, insider dealings. Ghana’s NPLs average ratio of 17.13% much higher than most peer countries like Nigeria (4.01%) and La Cote Divoire (8.8%) respectively.

The government’s dominance in economic activity, against the backdrop of weaknesses in fiscal management, has further increased vulnerabilities in the banking sector. State-owned enterprises (SOEs) and many small-and medium enterprises (SMEs) relied heavily on business from the government. Consequently, the government’s accumulation of payment arrears to contractors and other service providers has undermined their capacity to service their bank loans and created NPLs across the industry (IMF Country report 2011).

Ghana has historically recorded high levels of non-performing loans (NPLs) in the banking sector with an average of 17.13% between 2014 -2024. NPL ratios which have exceeded the acceptable level of 10% on average over the past decade (Demirguc-Kunt and Detriagache (1998).  At end December 2024, NPLs were estimated at 21.8 percent and several banks, including systemically important domestic banks and subsidiaries of reputable international banks, reported higher NPL ratios in the range of 16.96–40 percent. Though despite Bank of Ghana’s efforts to improve loan loss provisioning, misclassification and under-provisioning for loans is still a common occurrence among banks. The study has shown that high fiscal deficits over the past decade have led to high interest rates and engendered a further deterioration in bank assets, profits, and capital.

The high fiscal deficit of 15,2% in 2020; 12.2% in 2021; 9.9% in 2022 and 7.7% in 2023 posed some challenges and prospects of creating the fiscal space in the near term were uncertain as the potential for expenditure overruns were high ahead of the 2016 and 2020 elections. Inability to reduce or contain fiscal deficits have compounded the legacy debt to non-energy and energy sectors that had negatively impacted on the non-performing loan ratios.  Ghana’s fiscal deficits and its effects on price stability and output growth have been a major source of concern to various governments in the past, Central Bank of Ghana, the private sector, civil society, domestic and international investors and other major international financial institutions like the IMF, the World Bank and Rating Agencies among others.

Fiscal deficits picked up from 6.3 percent of GDP in 2015 to 7.8 per cent of GDP in 2016. Though it declined to 5.9 percent of GDP in 2017 against a program target of 6.3 percent of GDP, it significantly ballooned again to 7.2 percent of GDP in 2018 against a revised program target of 4.4 percent of GDP in consultation with the International Monetary Fund. Various governments in the past including the current government had to deal with the negative the plaque of fiscal deficits financing and its negative consequences on other macroeconomic variables particularly on inflation in the Ghanaian economy (Osei, and Olawale Oguloka, (2022). The 2023 high fiscal deficit of 7.7 percent of GDP poses some challenges and prospects of creating the fiscal space in the near term bare uncertain as the potential for expenditure overruns are high ahead of the 2024 elections.

Any high fiscal deficits had led to high interest rates and engender a further deterioration in bank asset quality, profits, and capital. The Russia and Ukraine war, Covid 19 pandemic, global geopolitics in the Middle East and 2022 economic downturn have impacted negatively on the level of NPLs as increased as the cost of business has been increasing and while small medium enterprise and individual borrowers faced greater difficulties to repay their debt to the banks.

Some bank specific factors noted in the Ghanaian banking sector, were weak credit risk management, poor internal controls, connected lending, insider dealing, and fraud was often the source of poor asset quality. Weaknesses in enforcing prudential regulations allowed banks to build up substantial loan concentrations while deficiencies in the analysis of individual bank risk and systemic risks have led to an under-appreciation of the stability risk implications.

Demirguc-Kunt and Detragiache (1998) argued that any country whose NPLs exceed 10% that country’s banking sector is in crisis. The non-performing loan ratio in the banking sector ranging from the lowest point of 11.00% in December 2014 to the highest point of 20.7% in December 2023, but NPLs further deteriorated to 21.8% in December 2024 averaging 17.13% over the period under review.  so, Ghanaian banking sector could be described as a fully-fledged crisis because of general repayment challenges on the part of borrowers reflecting general weak macro-economic imbalances in the form higher inflation, higher policy rates associated with higher lending rates, persistent depreciation of the local currency against the major trading currencies, higher energy cost and harsh business environment.

The structurally high level of NPLs in Ghana could be explained by a range of factors, including government arrears creating debt repayment difficulties for domestic suppliers, macroeconomic volatility, poor credit risk management practices, and a legacy of problem loans that remain unresolved or are not written off partly because of weak legal systems. These findings from the expansive literature and data review showed that higher NPLs in the Ghanaian banking sector was incorporate Read Full Story