Banks are lending again, but not to the economy that needs it most

… Credit recovery and the structural problem beneath it

By Sydney Nii Armah Codjoe &Ahmed Tahiru

Ghana’s banking sector is reopening the credit taps. After a prolonged period of macroeconomic turbulence marked by surging inflation, sharp currency depreciation, debt restructuring, and balance sheet stress, lending to the private sector is gradually recovering alongside broader economic stabilization.

Data from the Bank of Ghana shows that private sector credit is rebounding following the contraction experienced during the 2022–2023 crisis. Recent figures indicate that private sector credit has expanded by close to 19 percent, with the private sector now accounting for nearly 96 percent of total outstanding credit as fiscal consolidation reduces government borrowing.

At first glance, this appears to signal a healthy turning point. Rising credit often reflects improving liquidity conditions and renewed business confidence.

Yet beneath the recovery lies a more important structural question. The issue is no longer whether banks are lending. It is where that lending is going, what type of economic activity it is reinforcing, and whether Ghana’s financial recovery is translating into productive economic transformation.

The emerging pattern suggests a more cautious reality. Credit is returning, but it is flowing disproportionately toward sectors that are safer, faster, and less structurally transformative.

Where Credit Is Flowing and What It Reveals

The structure of lending increasingly reveals the priorities of Ghana’s banking system.

A significant share of credit, roughly 38 percent, is directed toward the services sector, particularly trade, transport, and commerce. Service sector lending has risen sharply from approximately GH¢5.3 billion in February 2025 to over GH¢9 billion in February 2026, reinforcing its dominance in credit allocation. This mirrors broader economic trends. Data from the Ghana Statistical Service shows that services accounted for more than half of Ghana’s GDP growth in early 2026, making it the primary driver of output expansion.

Credit to mining and quarrying has also increased significantly, reflecting banks’ preference for export oriented and foreign exchange earning sectors where repayment risks are lower.

In contrast, agriculture remains persistently underfinanced despite its central role in employment, food security, and rural livelihoods. Between January 2024 and February 2026, the sector received only a fraction of the credit extended to services. Growth within the sector has also slowed, exposing the consequences of limited investment and constrained access to affordable financing.

Equally concerning is the weakness in financing for logistics, storage, and distribution infrastructure, which weakens supply chain efficiency across the economy.

Taken together, these patterns reveal a broader structural reality. Ghana’s banking system is increasingly allocating capital toward economic circulation rather than productive transformation.

Trade, commerce, and extractive sectors generate faster cash flows, stronger collateral positions, and lower short term risk exposure. Agriculture, manufacturing, agro processing, and logistics require longer investment horizons, patient capital, and higher tolerance for uncertainty. In a post crisis banking environment, financial institutions are naturally gravitating toward survivability rather than transformation.

The consequence is significant. Credit is supporting economic activity, but not necessarily productive capacity. Growth becomes more visible in transactions than in industrial expansion or productivity improvement.

Why banks are lending this way

This allocation pattern is not irrational. It reflects the incentives and pressures currently shaping Ghana’s banking system.

Following the Domestic Debt Exchange Programme and broader macroeconomic instability, banks have prioritized capital preservation, asset quality management, liquidity protection, and predictable returns. The crisis fundamentally altered risk appetite within the financial sector. Institutions that experienced balance sheet losses are now more cautious about where and how they deploy capital.

This has reinforced a preference for short term lending, lower risk sectors, and borrowers with stronger collateral positions. High lending rates further intensify this dynamic. Large firms operating in commerce and extractive industries are better positioned to absorb these costs than smallholder farmers, manufacturers, logistics operators, and SMEs.

Beyond pricing, structural constraints continue to distort credit access. Weak land titling systems limit the use of agricultural land as reliable collateral. Insurance markets remain underdeveloped, increasing vulnerability to shocks. High levels of informality among SMEs also raise the cost of credit assessment, monitoring, and recovery.

But the deeper issue goes beyond risk management. Ghana’s financial system is increasingly optimizing for short cycle stability rather than long cycle transformation.

Transformation sectors such as agriculture, manufacturing, agro processing, and industrial logistics require patient financing and longer investment horizons. Yet these are the sectors that generate productive capacity, employment, export diversification, and long-term resilience.

When financial systems consistently avoid these sectors, economies risk becoming commercially active without becoming structurally stronger.

The risk of recovery without transformation

The current structure of credit allocation carries important long-term risks.

First, underinvestment in agriculture increases food security vulnerabilities and inflationary pressure. The recent tomato shortage triggered by export restrictions in Burkina Faso demonstrated how quickly supply disruptions can expose weaknesses within Ghana’s food system.

Second, concentration of credit in services and trade risks deepening import dependence. When domestic production sectors remain underfinanced, consumption increasingly relies on imported goods and external supply chains. This places sustained pressure on foreign exchange demand and weakens long term external resilience.

Third, limited financing for manufacturing and logistics constrains industrial competitiveness. Manufacturing remains central to productive transformation because it strengthens value addition, creates employment at scale, and deepens supply chains. Yet these sectors typically require longer term financing structures that commercial banks remain reluctant to provide.

This creates a dangerous imbalance. Ghana’s banking system may recover financially faster than the real economy transforms productively.

In effect, capital is flowing toward economic safety rather than economic restructuring.

What Ghana must rethink

Addressing this imbalance will require more than liquidity recovery. It will require deliberate efforts to reshape how productive sectors are financed and how the financial system interprets development risk.

Credit guarantee schemes, blended finance structures, and development finance partnerships can help reduce the perceived risk of lending to productive sectors. Improvements in land administration and SME formalization are equally important.

But the broader challenge is strategic. Ghana must begin treating capital allocation as a development issue, not merely a banking outcome.

Historically, Ghana has repeatedly emerged from periods of macroeconomic instability with improved liquidity conditions, yet struggled to translate recovery into deep productive restructuring. Financial recovery alone does not automatically produce industrial transformation.

Manufacturing illustrates this problem clearly. Industrial sectors require patient capital and longer investment horizons, yet commercial banking systems after periods of financial stress are rarely designed to finance transformation at that scale. Short cycle sectors optimize for liquidity. Transformation sectors optimize for productive capacity.

This creates an important tension within Ghana’s recovery model. Banks are behaving rationally from a balance sheet perspective, but the economy cannot industrialize sustainably if productive sectors remain structurally underfinanced.

Financial systems ultimately shape economic structure. Where credit consistently flows influences which sectors grow, which industries remain stagnant, and what type of economy emerges over time.

A banking system that consistently finances circulation over production eventually creates growth without depth.

If banks continue prioritizing sectors defined primarily by speed, liquidity, and short-term predictability, Ghana risks reinforcing an economy driven more by transactions than transformation.

The direction of credit matters more than the volume

Ghana’s credit recovery is real, but it remains incomplete.

The question is no longer whether banks are lending again. The more important question is whether the financial system is allocating capital toward the sectors capable of driving productivity, industrial expansion, employment creation, and long-term resilience.

At present, the answer remains mixed.

Capital is flowing, but largely toward sectors that optimize for safety and speed rather than transformation and productive depth. Unless financing begins shifting more meaningfully toward agriculture, agro processing, manufacturing, logistics, and industrial value chains, Ghana risks entrenching a pattern of growth that looks healthy in macroeconomic data while remaining structurally fragile underneath.

The deeper concern is that Ghana may no longer be facing a liquidity problem as much as a productive allocation problem. The economy is recovering financially faster than it is transforming structurally.

Economies are ultimately shaped by what their financial systems choose to reward. When capital consistently avoids productive transformation, structural stagnation gradually becomes a financial outcome rather than merely an economic accident.

In the end, the most important issue is not how much credit is growing. It is where that credit is going, what type of economy it is reinforcing, and whether Ghana’s recovery is building resilience or merely restoring activity.

Ahmed is a strategic writer and advocate for financial literacy, startups, and SME growth. He is a financial strategist who believes in building businesses through systems, structures, and frameworks. He studies the startup ecosystem with a focus on creating scalable, high-impact ventures. Ahmed aspires to become a global entrepreneur, building businesses that showcase African innovation and drive the continent’s economic growth to the next level.

Contact: 233 543 460 166 or [email protected] and www.linkedin.com/in/ahmed-tahiru

Sydney is a financial analyst and auditor specializing in financial strategy and investment analysis. A strong advocate for financial literacy, I have trained over 300 students in practical financial management and am a co-founder of Upcraft, a sustainability-driven enterprise focused on waste upcycling. He can be reached via email at [email protected] or by phone at 0553133174

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