Banks in Ghana Record GH¢4.33 Billion Write-off in Bad Debt for 2023

Ghana’s banking sector witnessed a significant reduction in bad debt write-offs in 2023, with banks collectively writing off GH¢4.33 billion compared to GH¢20.8 billion in the previous year, marking a 79.2% decrease.

The categorization of bad debt encompassed loan losses, depreciation, and other financial impairments, according to data from the Bank of Ghana.

Notably, banks reported lower impairments on financial assets during the year.

The substantial decline in bad debt write-offs was a welcome development for the banking industry, reflecting improved asset quality and risk management practices.

It signaled a positive shift from the challenges experienced in 2022, particularly regarding impairments on restructured bonds.

However, despite the improvement, asset quality risks remained elevated in December 2023, reflecting the lingering effects of macroeconomic challenges from the previous year.

The industry’s non-performing loan (NPL) ratio increased to 20.7% from 16.6% in December 2022, indicating persistent challenges in loan repayments.

The NPL ratio adjusted for fully provisioned loan loss categories also rose from 6.6% to 8.4% during the same period, highlighting ongoing concerns about credit quality.

The total stock of non-performing loans increased by 37.4% to GH¢15.8 billion by the end of December 2023.

Credit growth in the banking sector moderated throughout 2023 due to a combination of factors, including banks’ risk aversion and reduced credit demand amidst macroeconomic uncertainties.

Gross loans and advances grew by 10.9% in December 2023, compared to 29.1% in December 2022, while net loans and advances expanded by 9.4%, down from 26.8% over the same period.