Bank of Ghana requires lenders to focus on income over collateral

The Bank of Ghana (BoG) has introduced a draft directive that fundamentally shifts how financial institutions assess creditworthiness, moving away from a traditional reliance on physical assets. Under the proposed Credit Risk Management Directive, 2026, lenders will be required to prioritize a borrower’s income and cash flows as the primary basis for granting loans. This regulatory shift is designed to ensure more robust credit assessments and enhance the overall stability of the banking sector by focusing on actual repayment capacity.

The new guidelines mandate that banks and other financial institutions conduct comprehensive verifications of a borrower's financial history before approving any credit facilities. Instead of focusing primarily on the value of collateral provided as security, the central bank expects lenders to demonstrate a clear understanding of the borrower's ability to service the debt through regular earnings. While the BoG clarified that collateral will still play a role in the credit process, its significance in determining the actual performance and viability of a loan will be strictly limited under the new framework.

A key component of the draft directive is the requirement for lenders to factor in potential adverse economic conditions when evaluating loan applications. By stress-testing a borrower’s repayment capacity against economic volatility, the BoG aims to build a more resilient financial system. This proactive approach ensures that loans are not just viable under stable market conditions but can also withstand broader financial shocks, thereby protecting both the lending institutions and their customers.

The central bank has officially invited stakeholders and the general public to provide feedback on the draft rules, with a submission deadline set for November 30, 2026. Following the consultation period and any necessary revisions, the Credit Risk Management Directive is scheduled for a full rollout on July 1, 2027. This transition period is intended to give financial institutions sufficient time to align their internal credit policies and risk management frameworks with the new regulatory requirements.