A GNA feature by Jibril Abdul Mumuni
Accra, Nov. 12, GNA – A risk officer at a commercial bank once had a straightforward role: identify high-yielding government securities and allocate funds accordingly.
It was a relatively safe strategy with limited risk, as returns on government-backed investments were largely assured.
However, recent developments within Ghana’s financial sector have created a new reality for banks, as government securities now offer lower yields than they did in previous years.
This development is pushing banks back towards a fundamental banking role: assessing the creditworthiness of businesses and extending credit to support economic activity.
Government securities have long been a haven for banks, encouraging them to invest heavily in such instruments.
Banks often cite credit risk in business lending and the volatility of Ghana’s economy as reasons for their preference for government securities.
The government’s Domestic Debt Exchange Programme (DDEP), introduced during the 2022 economic downturn, also exposed another reality, that government securities are not entirely risk-free.
The PricewaterhouseCoopers (PwC) and DDEP-related impairment losses ranged between GHS16.3 billion and GHS19.5 billion across the banking sector, while about 40 per cent of banks’ equity was affected.
These two developments, lower yields on government Treasury bills and the lessons from the DDEP, are contributing to significant changes in Ghana’s banking sector.
Again, the Bank of Ghana’s Monetary Policy Report for July 2026, indicates that private-sector credit expanded by 41.2 per cent in June 2026, compared with 8.6 per cent during the same period within the previous year.
The strong growth in credit reflects improved macroeconomic conditions, easing inflation and lowering lending rates, which are encouraging businesses to seek financing for expansion.
Recent financial results from the GCB Bank illustrate the changing trend and showing that for the nine months ending September 2026, the bank’s net loans and advances grew by 57.3 per cent representing GH¢25.23 billion, significantly outpacing industry credit growth.
At the same time, its non-performing loans ratio declined to 4.8 per cent from 10.8 per cent a year earlier.
The bank’s performance also demonstrated the growing importance of non-interest income in a lower-rate environment, with Net fee and commission income increasing by 87.4 per cent to GH¢1.07 billion, while trading income rose by 71.6 per cent to more than GH¢1 billion.
The results suggest that banks are increasingly diversifying their sources of income rather than relying predominantly on earnings from government securities.
While lower interest rates and stronger economic activity are expected to support credit demand, rapid loan growth will require prudent underwriting standards, effective risk management and adequate capital buffers.
For Ghana’s banking sector, the era of relying heavily on high-yield government securities appears to be giving way to a more balanced model in which growth is increasingly driven by private-sector lending and diversified income streams.
The success of that transition will depend on the ability of the banking sector to sustain credit growth, maintain asset quality and support economic expansion while safeguarding financial stability.
GNA
Edited by Christabel Addo
Reporter: Jibril Abdul Mumuni
Email: [email protected]