What you need to know to start lending in Ghana

Lending is more than just numbers and interest rates—it’s about unlocking opportunities for people and businesses that need a financial lifeline.

In Ghana, although 85% of adults now have access to formal financial services, there’s still a growing need for alternative financing solutions, especially for small businesses. In fact, the SME sector accounts for over 70% of Ghana’s GDP, yet many face failure due to lack of access to credit/formal financing.

As a potential lender, you have the power to not only profit but also make a tangible impact on these businesses and individuals who are hungry for growth but starved of funding.

But here’s the thing: starting a lending business in Ghana isn’t as complex or unattainable as it may seem. With the right strategy and understanding of the market, becoming a successful lender might be easier than you think.

Gone are the days when only large financial institutions dominated the lending space. Today, the rise of digital lending platforms and mobile money, which has over 21 million active accounts in Ghana as of 2023, has made it easier for smaller lenders to enter the market with less friction.

The regulatory environment is also evolving, with flexible licensing frameworks like the Digital Credit Providers (DCP) licensing making it simpler to set up. And the timing couldn’t be better. Ghana’s economy grew by 6.9% year on year in the second quarter of 2024, with increasing demand for capital, especially from the SME sector.

There’s a gap—a goldmine, if you will—waiting to be tapped by smart, agile lenders who are willing to take the plunge.

So, how do you get started?

If you’re serious about lending in Ghana, get your license

Before you can start lending in Ghana, securing the appropriate license from the Bank of Ghana is non-negotiable. Whether you’re entering the digital lending space or traditional microfinance, the legal framework is strict and clear.

You’ll need to apply for licenses like the Digital Credit Providers (DCP) license or a microfinance license, depending on your business model. 

To help you navigate this process efficiently, we’ve already outlined every step in detail—from eligibility criteria to the application process. Read the full guide here.

Choose a lending model that fits Ghana’s market

These lending models offer unique advantages, but only those who approach the market with a strategic and data-backed mindset will truly thrive.

P2P lending

The P2P lending model has seen rapid growth globally due to its ability to connect lenders directly with borrowers, cutting out traditional banks. In Ghana, the opportunity here lies in the fact that 65% of the population remains unbanked or underbanked. P2P lending can tap into this market by leveraging mobile money infrastructure.

A report by Statista shows that more than 6.8 billion mobile money transactions were performed in Ghana, showing a robust potential user base for digital P2P platforms.

But, don’t be fooled into thinking this is an easy win to start lending in Ghana. P2P lending requires significant risk management systems, as default rates can be higher compared to traditional loans. Global default rates for P2P loans averaged 3.5%, but in Africa, with fewer reliable credit history systems, defaults can be higher.

You’ll need a solid credit scoring mechanism—whether that’s using more alternative data sources like mobile phone usage or utility payments—to manage risk.

Learn how to get your USSD as a lender in Ghana.

Microfinance

Microfinance institutions (MFIs) have been a lifeline for small-scale entrepreneurs in Ghana, particularly in rural areas.

By the 2000s, MFIs reached around 8 million clients, a significant portion of the population. But, the sector faced major disruptions due to the rise of unregulated service providers, leading to fraud and instability​.

To address these challenges, the Bank of Ghana implemented regulations in 2011, introducing tiers for different MFI types, including Savings and Loans Companies (S&Ls) and Financial NGOs (FNGOs).

On May 31, 2019, the Bank of Ghana announced that it had taken the measure to sanitize the financial sector and eliminate 192 MFIs identified as insolvent and an additional 155 that had ceased operations altogether.

If you want to enter the MFI space when you start lending in Ghana, regulatory compliance should be your cornerstone. You need to understand the Microfinance Act 2011 (Act 774), which governs the sector, is essential, particularly around capital requirements and borrower protection laws.

Digital lending

Digital lending has been making a significant impact, both globally and within Africa. In Ghana, the rise of mobile technology and the regulatory framework introduced by the Bank of Ghana Digital Credit Providers licensing has opened the door for new digital lenders.

According to data from Statista, the number of mobile money accounts in Ghana now exceeds 21 million, offering a massive market for lenders using mobile platforms. Digital lenders like Fido Money Lending are already taking advantage of AI-driven credit scoring, reducing decision times from days to minutes.

However, scaling a digital lending platform requires significant upfront investment in tech infrastructure. But, not with Lendsqr.

Featured read: What problem is Lendsqr solving for lenders?

Use technology to scale your lending business from the jump

Technology is the backbone of any successful operation, and this is particularly true for Ghana’s fast-evolving market.

You need a lending management software to streamline operations, from loan origination to disbursement and collection, especially when you just start lending in Ghana. Some of the most prominent LMS options available in Ghana include Lendsqr, MSoft Ghana Ltd, and Business Warrior.

Each of these platforms offers unique features. But for lenders just starting out, Lendsqr stands out because it is the most affordable in Africa, easy to use and can integrate with local financial infrastructure.

Lendsqr’s cloud-based solution allows new lenders to launch operations quickly with minimal upfront cost, while also offering extensive tools for customer management, reporting, and compliance—all crucial components for scaling effectively.

Its strength also lies in its deep integration with mobile money platforms, which are the primary financial tool for millions of Ghanaians. The platform is built to handle growing portfolios, making it easy to manage thousands of clients without additional manual effort.

Automated workflows, real-time data analytics, and built-in compliance checks mean lenders can focus more on growth and less on day-to-day operations.

In comparison, traditional systems or less integrated platforms might require extensive manual processes, leading to inefficiencies.

For any lender looking to grow sustainably in Ghana, using the right technology like Lendsqr is not just an option—it’s a necessity.

But don’t just take our word for it, check out the comparison between Business Warrior and Lendsqr, then decide for yourself.

Understanding the regulatory framework is non-negotiable

The lending market in Ghana operates under a strict regulatory framework overseen by the Bank of Ghana (BoG), which ensures that financial institutions—including banks, microfinance institutions, and digital lenders—operate in a way that promotes financial stability and protects consumers.

Key legislation governing the sector includes the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) and the Non-Bank Financial Institutions Act, 2008 (Act 774).

These laws provide the foundation for licensing requirements, capital adequacy standards, and governance frameworks for lenders. Any prospective lender must ensure full compliance with these acts before operating to avoid penalties and potential shutdowns.

A unique aspect of Ghana’s regulatory landscape is the Credit Reporting Act, 2007 (Act 726), which compels all lenders to report borrower information to licensed credit bureaus like Dun and Bradstreet Credit Bureau Limited and Digital Credit Management.

This system, while not as mature as in developed economies, is crucial for improving credit risk management.

Lenders must comply with data submission requirements, allowing for a more robust credit scoring system that benefits both the lenders and borrowers This reduces default risks and promotes more informed lending decisions across the market.

Build your loan portfolio before you start lending in Ghana

First, segmentation is key. You can’t treat all borrowers the same because their risk profiles vary significantly. According to a study by the World Bank, 50% of SMEs in Sub-Saharan Africa lack access to formal credit due to the difficulty lenders face in evaluating their risk.

Your loan portfolio should be segmented based on industry, loan size, and borrower type (e.g., individuals versus SMEs). In Ghana, micro, small, and medium enterprises (MSMEs) represent 85% of the private sector, but they face the highest risk of loan defaults​.

For instance, during economic downturns, the agriculture sector tends to remain more stable due to its fundamental role in Ghana’s economy, where agriculture contributes around 54% of GDP.

Next, you need a solid credit scoring system. The challenge in Ghana is that many individuals and businesses lack formal credit histories, so you’ll need to look for alternative data sources. Mobile money usage, payment of utility bills, and even social media activity can offer valuable insights.

You also need a risk management system

Risk management goes hand in hand with portfolio building when you start lending in Ghana. A crucial element here is risk-based pricing.

Not every borrower should receive the same interest rate. Borrowers with better credit histories or more collateral should receive lower rates, while higher-risk clients should pay more to offset the risk of default.

A study highlighted that the default rate could be as high as 86.67% for certain segments, influenced by various factors such as client assessment, loan type, and borrower characteristics.

Plus, loan performance monitoring is critical. This means closely tracking key metrics like portfolio-at-risk (PaR), which measures the percentage of your portfolio that is more than 30 days overdue.

Leading MFIs typically manage to keep their PaR rates between 1% and 6%, with few exceeding 10%. A PaR above 10% is generally considered a red flag, indicating potential issues with loan repayment and overall portfolio quality.

Regular monitoring allows you to take early action on late payments, whether through restructuring loans or intensifying collection efforts.

You’re entering a market that’s ripe for innovation

You’re not only entering a market that’s ripe for innovation but also providing essential support to individuals and SMEs who are the heartbeat of Ghana’s economy.

Our final two cents? Embrace the journey with both strategy and heart. Equip yourself with the right licenses and choose a lending model that resonates with the local market’s needs. Use technology like Lendsqr to streamline your operations from day one—it makes a world of difference. And never underestimate the power of understanding and adhering to the regulatory framework; it’s your safety net and compass in the industry.