By Elizabeth Larkwor Baah, GNA
Tema, Nov. 12, GNA — A public sector worker who takes a bank loan and agrees to have monthly instalments deducted directly from their salary would ordinarily expect the arrangement to provide convenience and peace of mind.
Each month, the worker reports for duty, earns a salary and sees the agreed loan instalment deducted at source. With the deduction reflected on the payslip, the expectation is that the repayment process has been completed.
But for some public sector employees in Ghana, that expectation is being challenged by delays in transferring deducted loan repayments to banks, raising concerns about the integrity of the salary-backed lending system.
The Ghana Association of Banks (GAB) announced the proposed action in October 2026, citing persistent delays in the transfer of loan repayments deducted from public sector workers’ salaries.
Speaking at the association’s 43rd Annual General Meeting in Accra, Mr John Awuah, Chief Executive Officer of GAB, said banks were awaiting about three months of outstanding remittances as of October, although the relevant amounts had already been deducted from workers’ salaries.
He warned that the banking industry could no longer continue absorbing the financial consequences of the delays, which he said were affecting loan portfolios and increasing impairment charges.
The association’s position has raised concerns among public sector employees following threats by banks to suspend new lending to workers whose salaries are processed through the Controller and Accountant-General’s Department (CAGD).
Such a suspension, if implemented, could affect teachers, nurses, doctors and other public sector employees who rely on salary-backed loans to meet household and personal financial obligations.
For many, these facilities provide access to funds for school fees, rent advances, healthcare, home improvements and unexpected family expenses. The implications therefore extend beyond the relationship between banks and government institutions to the financial security of ordinary households.
A deduction made, but repayment uncertain
When an authorised deduction is made from a worker’s salary, the employee expects the amount to be transferred to the designated lender. However, until the funds reach the bank, the lender may continue to record an outstanding repayment.
This raises concerns about how affected workers are treated in banks’ records, particularly where administrative delays could be mistaken for individual repayment defaults.
It also raises questions about whether workers could face difficulties accessing additional credit or suffer other consequences for delays beyond their control.
Dr Daniel Osabutey, a Senior Lecturer at the Business School of the Accra Technical University, said suspending new lending might protect banks against further exposure but would not address the institutional weaknesses responsible for the delayed remittances.
He called for reforms to ensure that money deducted from workers’ salaries is transferred promptly to the designated financial institutions.
One option, he proposed, was a payroll settlement arrangement under which authorised loan deductions and workers’ net salaries would be processed within the same settlement cycle.
Under the arrangement, money deducted for loan repayment would be transferred directly to the relevant lender rather than remain in an intermediary government account awaiting subsequent payment.
He also recommended an interim ring-fenced settlement account, supported by clear payment deadlines, transaction-level reconciliation and regular reporting of outstanding deductions.
Dr Osabutey said responsibility for delays should be clearly established, with appropriate procedures for resolving disputes and holding responsible institutions accountable.
Banks face pressure to reduce bad loans
The banks’ concerns are also linked to efforts by the Bank of Ghana (BoG) to improve the quality of loans within the financial sector.
The central bank has directed regulated financial institutions to reduce their non-performing loan (NPL) ratios to no more than 10 per cent by the end of December 2026.
The rising level of non-performing loans remains a concern for Ghana’s banking sector, with implications for financial stability, profitability and banks’ capacity to extend credit to businesses and individuals.
Delayed loan repayments and weaknesses in credit administration can place additional pressure on financial institutions, making effective loan management and recovery increasingly important.
However, the situation presents a distinction between borrowers who fail to meet their repayment obligations and workers whose salaries have already been deducted but whose repayments have not been transferred to the lenders.
The pressure on household finances
For workers who depend on salary-backed loans, the possibility of restricted access to credit could create additional financial difficulties.
Madam Angelina Baidu, a retired teacher with more than 25 years of teaching experience, said she relied on loans for several years during her active service, describing them as an important source of financial support for public sector employees.
She explained that loans helped workers meet their financial obligations, particularly because salaries were relatively low and often insufficient to cater for their needs
Mrs Baidu appealed to the authorities to address the repayment challenges and put appropriate arrangements in place to prevent public sector workers from being disadvantaged or denied access to loans.
Dr Osabutey, however, said banks should not rely solely on the regularity of public sector salaries when approving loans.
He said lenders must consider existing loan obligations, disposable income, essential household expenses and borrowers’ ability to withstand unexpected financial difficulties.
A regular salary, he noted, did not necessarily mean that a worker had the capacity to take on additional debt.
The situation therefore presents two concerns: protecting banks against avoidable repayment risks while ensuring that workers are not unfairly disadvantaged by administrative failures.
The need for accountability
Dr Osabutey said resolving the matter would require coordinated action by the CAGD, the Ministry of Finance, banks and other relevant institutions.
He said the CAGD must explain the reasons for the delays and provide a clear timetable for reconciling and transferring outstanding deductions.
Banks, on their part, should ensure that workers who have fulfilled their repayment obligations are not treated as though they had deliberately defaulted.
He also called on the BoG to ensure that credit-risk management measures distinguished between genuine loan defaults and administrative delays in transferring repayments, in accordance with applicable prudential rules.
Making loan repayments more reliable
Dr Osabutey suggested that loan repayment arrangements should be portable through authorised electronic mandates, allowing instalments to continue when borrowers changed employment or relocated, subject to agreed terms and applicable laws.
He said the Ghana Card could strengthen identity verification, but reliable payment channels, enforceable agreements and effective recovery mechanisms remained essential.
He said experiences in the United Kingdom, the United States and Kenya offered useful lessons for Ghana, adding that the country must prioritise responsible lending and repayment continuity.
“The loan should follow the borrower, not the payroll,” he said.
He said the issue went beyond whether banks should continue granting loans to public sector workers to the confidence employees placed in a system that deducted money from their salaries for a specific purpose.
For workers who had already surrendered part of their monthly earnings to service loans, the expectation was straightforward: money deducted should be accounted for and transferred promptly to its intended destination.
Until that happens, the threat of suspended lending will remain a concern for workers, banks and the wider financial sector.
GNA
Edited by Laudia Anyorkor Nunoo
Reporter: Elizabeth Larkwor Baah
Email: [email protected]