Banks in Ghana wrote off GH¢4.33 billion as bad debt in 2023, a 79.2% reduction over that of 2022.

In 2022, the total bad debt was estimated at GH¢20.8 billion.

The bad debt was classified as loan losses, depreciation and others.

According to the Bank of Ghana, banks reported lower impairments on financial assets in 2023.

Total provisions and impairments contracted by 79.2% in December 2023, after increasing sharply in December 2022 on account of the huge impairments on restructured bonds.

Asset quality risks elevated in 2023

Meanwhile, asset quality risks were elevated in December 2023, reflecting the lingering impact of the 2022 macroeconomic challenges on the banking sector.

Notwithstanding the moderation in growth in the stock of non-performing loans (NPL), the industry’s NPL ratio increased to 20.7% in December 2023, from 16.6% in December 2022.

Similarly, the NPL ratio adjusted for the fully provisioned loan loss category increased from 6.6% to 8.4% during the same comparative period.

The NPL stock increased by 37.4% to GH¢15.8 billion in December 2023.

Credit growth moderated in 2023

Also, credit growth moderated in 2023 on account of a general risk aversion by banks as well as a softening in credit demand following the recent macroeconomic challenges.

Growth in gross loans and advances moderated to 10.9% in December 2023, from 29.1% in December 2022, while growth in net loans and advances (gross loans adjusted for provisions and interest in suspense) moderated to 9.4%, from 26.8% over the same review period.