Understanding Collateral Requirements in Ghana

For most Ghanaian businesses seeking bank financing, the conversation inevitably turns to one critical word: collateral. It is the bridge between a borrower’s promise and a lender’s confidence—the tangible assurance that if a business fails to repay, the bank has a path to recover its funds.

Yet for many entrepreneurs, particularly Small and Medium-sized Enterprises (SMEs), collateral requirements represent one of the most intimidating barriers to accessing credit. The language of “fixed charges,” “debentures,” and “loan-to-value ratios” can obscure what is essentially a straightforward concept: banks need security.

This THSB editorial provides a comprehensive guide to understanding collateral requirements in Ghana, examining the legal framework, the types of collateral banks accept, the role of the Collateral Registry, and practical steps businesses can take to improve their borrowing position.

The Legal Foundation: Act 1052 and the Collateral Registry

Understanding collateral in Ghana begins with the Borrowers and Lenders Act, 2020 (Act 1052), which repealed and replaced the 2008 Act . This legislation established the legal framework for secured lending transactions and created the Collateral Registry at the Bank of Ghana .

The Collateral Registry is a pivotal innovation in Ghana’s credit market. Its primary function is to register security interests in collateral created by borrowers to secure credit facilities provided by lenders . As the first Secured Transactions Registry on the African continent, it was established to reduce information asymmetry between borrowers and lenders in credit transactions .

The Registry operates a web-based application called the Collateral Registry Application Software (CRAS), designed to contain information relating to security interests . Its core functions include:

• Registering security interests

• Keeping and maintaining a Register of Security Interests

• Providing a platform for conducting searches on security interests

• Facilitating the realisation of assets upon default by a borrower

For a security interest to be valid and enforceable against third parties, the credit agreement must be registered with the Collateral Registry within 21 days of execution . This registration gives the lender priority over any other security interest that has not been registered . An unregistered credit agreement is binding only on the parties to the transaction, meaning the lender’s security could be jeopardized if the borrower defaults or deals with the collateral in favour of another creditor.

Types of Collateral Accepted by Ghanaian Banks

Ghanaian banks accept a wide range of assets as collateral, broadly categorised into tangible and intangible assets, as well as movable and immovable property.

Immovable Property (Real Estate)

Landed property—residential or commercial—remains the most traditional and preferred form of collateral . Banks typically accept:

• Residential landed properties

• Commercial landed properties

The advantage of real estate collateral is that property in good locations tends to appreciate over time, potentially covering a substantial portion of the loan upon default . However, if the property is not in a prime location, disposal upon default can be challenging, and borrowers may launch legal actions to delay any potential sale .

Movable Assets

Data from the Bank of Ghana reveals that movable assets constitute the largest proportion of registered collateral in Ghana. In the first quarter of 2023, movable assets accounted for 64.2% of all registered collateral, compared to just 2.2% for immovable collateral alone . A further 33.6% represented a combination of both immovable and movable (company/business) assets .

Commonly accepted movable assets include:

• Vehicles and equipment: Tangible assets like vehicles and business equipment that are in demand on the local market

• Inventory and stock of goods: The major collateral type used to secure loans, according to BoG data

• Plant and equipment: Should be of a type that has ready resale value

Financial Assets

• Cash: Deposits held with a reputable bank or non-banking financial institution

• Investments: Securities or investment holdings

• Shares: Shares in reputable companies can be used as collateral. A credit agreement must be executed over the shares identifying them as security, and registered with the Collateral Registry. Alternatively, shares can be transferred to the lender to hold in trust for the borrower, to be transferred back upon repayment

Receivables and Intangibles

• Assignment of accounts receivable: The business uses its potential income, inflows, or claims as collateral. The advantage is that the lender can collect the income directly to defray the debt, though this may require borrower cooperation

• Unpaid invoices: Invoices of solvent or reputable organisations or persons

• Blanket lien: A security interest covering all assets of the borrower

Understanding Loan-to-Value Ratios and Thresholds

Banks do not lend the full value of collateral. Instead, they apply a loan-to-value (LTV) ratio, lending only a percentage of the collateral’s appraised value to create a buffer against market fluctuations and forced-sale discounts.

While specific LTV ratios vary by bank and asset type, a useful benchmark comes from Fidelity Bank’s Young Entrepreneurs Initiative, which outlines collateral expectations across different loan tiers :

Importantly, Fidelity Bank notes that applications falling within 10% of total asset shall not require any collateral, while applications exceeding 10% of total asset will require collateral requested by the Bank .

Types of Security Interests and Charges

The Borrowers and Lenders Act recognises several types of security interests :

1. Fixed Charge: A charge over specific, identifiable assets of a company. The assets must be identified and valued to determine whether they are sufficient to satisfy the debt in the event of default. The disadvantage is that upon default, disposing of the assets can be challenging if the debtor institutes frivolous suits to frustrate the process .

2. Floating Charge: A charge over a class of assets that may change in the ordinary course of business (e.g., stock, raw materials). This can be created even where the business has no assets at the time, providing future security. However, upon default, there may be no assets available for enforcement .

3. Mortgage: A security interest over property or shares, where the property or shares can be disposed of to pay off the debt upon default .

4. Assignment of Receivables: Using potential income, inflows, or claims as collateral .

5. Pledge: Physical delivery of an asset as security .

6. Contractual Lien: The right to retain possession of an asset until a debt is paid .

7. Equitable Charge: A security interest created without transfer of title or possession .

Lenders often use a combination of these different types of security interests to achieve their intended purpose .

Guarantees as Security

Guarantees from third parties are commonly accepted as a form of security in Ghana . These include:

• Personal guarantees: Individuals pledge their personal assets or reputation to secure the loan

• Bank guarantees: A bank undertakes to pay if the borrower defaults

• Financial guarantees: A financial institution guarantees repayment

For a guarantee to be valid, it must be executed in writing, signed by all relevant parties, and registered at the Collateral Registry . Lenders must verify the credibility and capacity of the guarantor, and in the case of a bank guarantee, confirm the credibility of the issuing bank .

A significant recent development is the Bank of Ghana’s approval of guarantees issued by state-backed institutions as acceptable collateral. In September 2025, the BoG announced that guarantees from the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) would be treated as collateral, with plans to extend this to the Development Bank Ghana (DBG) .

This policy is designed to de-risk lending, particularly to agribusinesses. John Awuah, CEO of the Ghana Association of Banks, explained the impact: “If it is unsecured, you can lend up to 10 percent of your net owned funds. But if it is secured because the central bank is accepting the guarantee, then you can lend up to 25 percent” . This means a bank could lend GHS 25 million instead of GHS 10 million to the same borrower if the loan is backed by an acceptable guarantee.

The Collateral Registration Process

Registering a security interest involves several steps:

1. Execute a Credit Agreement: The credit agreement must be in writing and clearly identify the lender, the borrower, the collateral, and the secured obligation .

2. Ensure Legal Ownership: The borrower or guarantor must possess the requisite legal and beneficial interest in the collateral property .

3. Verify No Prior Encumbrances: The security interest must be free from any other claims .

4. Register with the Collateral Registry: The credit agreement must be registered with the Collateral Registry within 21 days of execution . Registration can be done online through the CRAS platform .

5. Pay Applicable Fees: Costs associated with perfecting a security interest include stamp duty and administration charges for registration at the Collateral Registry. The amount depends on the asset used as collateral .

Factors Banks Consider When Assessing Collateral

When evaluating collateral, lenders consider several factors :

• The nature of the security: What type of asset is being offered?

• The value of the collateral: Is it sufficient to cover the loan?

• The facility amount: How much is being borrowed relative to collateral value?

• The credibility of the borrower: Does the borrower have a track record of honouring obligations?

• The nature of the business: What industry is the business in, and what are its prospects?

• The borrower’s financial history: Has the borrower managed credit responsibly?

• The duration of the facility: Longer tenures may require different collateral considerations

Recent Trends in Collateralised Lending

Data from the Bank of Ghana’s Collateral Registry provides insight into lending patterns. In the first quarter of 2023, a total of 79,364 assets were registered as collateral by Banks and Specialised Deposit-Taking Institutions, up from 76,142 in the same period of 2022 .

The Commerce and Finance sector accounted for the highest share of secured credit at 32.8%, followed by Services (27.2%), Mining and Quarrying (8.4%), Manufacturing (7.9%), and Electricity, Gas and Water (7.6%). The lowest recipients of secured loans were the Agriculture, Forestry and Fishing sector (3.6%), Transport and Haulage (0.8%), Cottage Industries (0.1%), and Information & Communications (0.02%) .

Regarding enforcement, 103 realisation requests were received from lending institutions in Q1 2023, with 79 Memoranda of No Objection certificates issued to facilitate enforcement. Savings and Loans companies were the highest recipients, receiving 60.8% of approved realisation requests .

Practical Steps for Businesses Seeking Collateralised Loans

For Ghanaian businesses seeking bank financing, several practical steps can improve outcomes:

1. Understand What You Have: Conduct an inventory of business and personal assets that could serve as collateral. Consider both tangible assets (property, equipment, vehicles, inventory) and intangible assets (receivables, contracts, guarantees).

2. Get Professional Valuations: For property and significant equipment, obtain professional valuations before approaching the bank. This demonstrates preparedness and provides a realistic basis for loan negotiations.

3. Maintain Clear Title: Ensure all assets offered as collateral have clear, unencumbered title. Resolve any disputes or claims before applying for credit.

4. Explore Guarantee Schemes: Investigate whether your business qualifies for guarantees from institutions like GIRSAL (for agribusiness) or DBG (for manufacturing, agriculture, services, and SMEs, with emphasis on women-led and first-time borrowers) .

5. Prepare Comprehensive Documentation: Have all relevant documents ready: title deeds, registration certificates, valuation reports, audited accounts, tax clearance certificates, and identification.

6. Understand the Terms: Before signing, ensure you understand the credit agreement, including what happens in the event of default and the bank’s rights over the collateral.

7. Build a Relationship: Develop a relationship with your bank before you need the loan. Regular account activity, transparent communication, and good financial discipline build credibility that can influence collateral negotiations.

Conclusion From THSB

Collateral requirements are a fundamental reality of business lending in Ghana, but they need not be an insurmountable barrier. The legal framework under Act 1052, the existence of the Collateral Registry, and the increasing acceptance of guarantees and movable assets have expanded the possibilities for businesses seeking secured credit.

The key for businesses is preparation. Understanding what types of collateral banks accept, how the registration process works, and what factors influence lending decisions positions entrepreneurs to negotiate from strength. For asset-light businesses, exploring guarantee schemes and building strong financial records can open doors that traditional collateral requirements might otherwise close.

As Ghana’s credit market continues to evolve—with movable assets now accounting for nearly two-thirds of registered collateral and guarantee schemes gaining acceptance—the path to secured financing is becoming more accessible. For businesses willing to invest the time in understanding the system, collateral can become not a barrier, but a bridge to growth.

Frequently Asked Questions (FAQs)

1. What is the Collateral Registry in Ghana?
The Collateral Registry is a body established under the Borrowers and Lenders Act, 2020 (Act 1052) at the Bank of Ghana. It operates an online platform to register security interests in collateral created by borrowers to secure credit facilities, enabling lenders to establish priority and facilitating searches on assets pledged as collateral .

2. What types of collateral do Ghanaian banks accept?
Ghanaian banks accept various collateral types including landed property (residential and commercial), movable assets (vehicles, equipment, inventory, stock of goods), financial assets (cash, investments, shares), and intangibles (accounts receivable, unpaid invoices). Guarantees from credible third parties are also accepted .

3. How long do I have to register a security interest?
A credit agreement creating a security interest must be registered with the Collateral Registry within 21 days of execution to be valid and enforceable against third parties .

4. What happens if I don’t register my collateral?
An unregistered credit agreement is binding only on the parties to the transaction. The lender’s right to enforce the security interest is subject to the rights of any other lender or person entitled to priority under the Act. Registration ensures priority over other security interests that have not been registered .

5. Can I use movable assets like inventory or equipment as collateral?
Yes. In fact, movable assets constitute the largest proportion of registered collateral in Ghana, accounting for 64.2% of all registered collateral in Q1 2023. Cash and inventories/stock of goods were the major collateral types used .

6. What are the costs associated with registering collateral?
Costs include stamp duty and administration charges for registration at the Collateral Registry. The amount depends on the asset used as collateral .

7. Can I use a guarantee as collateral?
Yes. Personal guarantees, bank guarantees, and financial guarantees are commonly accepted. The guarantee must be executed in writing, signed by all relevant parties, and registered at the Collateral Registry .

8. What is the new policy regarding GIRSAL and DBG guarantees?
The Bank of Ghana has approved guarantees issued by GIRSAL (Ghana Incentive-Based Risk-Sharing System for Agricultural Lending) as acceptable collateral, with plans to extend this to Development Bank Ghana (DBG). This allows banks to lend more against such guarantees—up to 25% of net owned funds instead of 10% for unsecured lending .

9. Is there any situation where collateral is not required?
Some banks may waive collateral requirements for smaller loans. For example, Fidelity Bank indicates that applications falling within 10% of total asset may not require collateral, though applications exceeding that threshold will require collateral .

10. What is the difference between a fixed charge and a floating charge?
A fixed charge is over specific, identifiable assets of a company. A floating charge is over a class of assets that may change in the ordinary course of business (like stock or raw materials) and can be created even where the business currently has no assets .

11. How do banks value collateral?
Banks consider factors such as the nature of the security, the value of the collateral relative to the facility amount, the location and condition of property, the marketability of assets, and the credibility and financial history of the borrower .

12. What happens if I default on a secured loan?
Upon default, the lender can apply to the Collateral Registry for a Memorandum of No Objection to facilitate enforcement. Once issued, the lender can take steps to realise the collateral, which may involve selling the asset to recover the debt. However, borrowers may challenge enforcement through legal action .

13. Which sectors receive the most secured credit in Ghana?
According to BoG data, the Commerce and Finance sector receives the highest share of secured credit (32.8%), followed by Services (27.2%), Mining and Quarrying (8.4%), and Manufacturing (7.9%) .

14. Are there alternatives to commercial banks for secured loans?
Yes. Finance houses licensed by the Bank of Ghana offer loans to clients, though they are not licensed to receive deposits. These are alternatives to commercial banks for secured financing .

15. Can a foreigner provide collateral for a loan in Ghana?
While the Borrowers and Lenders Act does not specifically prohibit foreign guarantors, lenders will conduct due diligence on the credibility of the guarantor and the enforceability of any foreign assets as collateral. Legal advice should be sought for cross-border security arrangements.

Source: The High Street Business