Banks operating in Ghana wrote off ¢2.92 billion as bad debt in the first 10 months of 2022, the Domestic Money Bank’s Income Statement has revealed.

The bad debt which was 66.8% more than the previous year was as a result of loan losses, depreciation, among others. During the same period in 2021, ¢1.75 billion was written off as bad loans.

According to the Bank of Ghana, the banking industry’s Non-Performing Loans (NPLs) stock increased to ¢11.3 billion in October 2022, from ¢8.4 billion in October 2021. This is partly reflecting the revaluation of the foreign currency NPLs and deterioration in some domestic currency portfolios.

However, the industry’s asset quality (NPL ratio) improved during the period under review from 16.4% in October 2021 to 14.0% in October 2022.

When adjusted for the fully provisioned loan loss category, the industry’s NPL ratio declined sharply from 6.2% to 3.9%.

The decline in the NPL ratio, according to the Bank of Ghana, was due to higher growth in total loans (57.7% year-on-year growth) relative to the NPL stock (34.2% year-on-year growth) during the review period.

Services only sector to record increase in NPL

With the exception of the services sector, which recorded an increase in NPL ratio from 8.4% in October 2021 to 8.6% in October 2022, the NPL ratios for all the other sectors declined.

Specifically, the NPL ratio of the commerce and finance sector declined from 23.8% in October 2021 to 15.9% in October 2022, while that of agriculture, forestry and fishing declined from 29.9% to 22.4% during the same comparative period.

Five other sectors also recorded declines in NPL ratios, namely, the mining and quarrying sector (from 8.9% to 4.6%); manufacturing (from 18.0% to 14.6%); electricity, water and gas (from 15.4% to 11.1%); transport, storage and communications (from 11.8% to 11.2%), and; construction (from 35.0% to 31.7%).

The NPL ratio for the construction sector was the highest at 31.7%, followed by agriculture, forestry and fishing at 22.4%, while the mining and quarrying sector maintained the lowest NPL ratio of 4.6% during the period under review.