Banks to blacklist defaulters, borrowers with bad credit history to mitigate rising NPLs

Banks in collaboration with the Bank of Ghana, are implementing stringent measures to restrict access to credit for individuals and businesses with poor credit histories.

Spearheaded by the Credit Reference Bureau and initiatives mandated by the Bank of Ghana, these measures aim to bolster responsible lending practices and minimize the risk of defaults.

According to John Awuah, Chief Executive of the Ghana Association of Banks, borrowers with a history of defaulting on payments will face automatic blacklisting, effectively barring them from obtaining further loans.

Additionally, banks will refrain from extending credit to individuals unable to fulfill rental obligations, underlining the importance of financial prudence and accountability.

“We have gotten to that stage where, a default, will automatically black list, that borrower. Also, if you cannot pay your rent there is no need for banks to lend to you”, he remarked.

Expanding the scope of credit reporting portals, financial institutions will now scrutinize borrowers’ obligations across various sectors, ensuring a comprehensive assessment of creditworthiness.

Mr Awuah speaking during an interview on PM Express dismissed claims linking high Non-Performing Loans (NPLs) of banks to ambitious credit targets, asserting that loan approvals hinge on loan quality rather than meeting quotas.

“The credit committee that approve these loans are not moved by targets, but rather the quality of loans”, he stated.

Statistics from the Bank of Ghana reveal that NPLs hover around 20%, signaling a concerning trend of loan defaults. Dr. Ernest Addison, Governor of the Bank of Ghana, attributes the surge in bad credit to broader macroeconomic challenges experienced in 2022, resulting in repayment difficulties for borrowers.

Speaking further, Mr Awuah disclosed that significant progress has been made with the judiciary to help in the recovery of bad loans.

He said the Chief Justice, Gertrude Torkornoo, has also committed to help the association.

“We are working with the judges when it comes to training to help them appreciate things like the borrowers and lenders Act and how all these can improve loan recovery,” he quipped.

The Bank of Ghana recently reviewed its regulations on credit extension advising, financial institutions to ensure borrowers understand the terms and conditions.

It maintained that failure to strictly observe the regulations could make the loan agreement not binding.