BoG proposes tougher rules on loan repayment assessment
The Bank of Ghana (BoG) has proposed rules requiring lenders to assess borrowers’ ability to repay loans from income and cash flows, rather than rely on collateral.
The Bank of Ghana (BoG) has introduced recommendations for stricter guidelines on evaluating loan repayments. These proposed rules are part of the draft Credit Risk Management Directive, 2026, which aims to enhance credit assessment, loan monitoring, and early detection of problematic loans. Paragraph 53 of the draft document states that collateral should not replace a thorough evaluation of a borrower's repayment capability.
The proposed regulations apply to banks, specialized deposit-taking institutions, non-bank financial entities, and financial holding companies regulated by relevant laws. Under the new rules, lenders would be required to validate borrowers' income, cash flows, repayment history, and expenses, and determine their capacity to manage loans during challenging economic times, such as escalating interest rates and diminished income.
For businesses, assessments will encompass historical financial performance, projected cash flows, management expertise, industry conditions, equity contributions, and the ability to bear risk. Lenders may also incorporate alternative data and analytical tools, provided they are trustworthy, explainable, and appropriate. The draft retains collateral requirements but mandates responsible practices for their acceptance, appraisal, and enforceability.
Lenders will also need to reassess collateral values periodically and ensure that assessments are independent of credit origination, evaluation, and approval. The draft specifies that collateral valuation must reflect fair market value, taking into account market liquidity and realization timeframe. Paragraph 189 further clarifies that collateral cannot decide whether a loan is classified as non-performing; a loan should be labeled as non-performing even if the pledged asset value surpasses the overdue amount.
According to the document, collateral and other mitigants can be taken into account when evaluating the likelihood of default but should not influence the counting of overdue payments or the determination of non-performance. The exposure draft invites feedback until November 30, 2026, and regulated institutions will have until June 30, 2027, to adjust their governance structures, policies, and procedures to align with the directive, which is set to become effective on July 1, 2027.
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