Private sector credit in Ghana has grown by 29% in real terms over the past year, even as the Bank of Ghana holds its monetary policy rate steady at 14%. This data comes from the latest Monetary Policy Committee release and was cited by John Awuah, CEO of the Ghana Association of Banks, at a recent Chartered Institute of Bankers Ghana event.
Mr Awuah said the steady policy rate reflects a cautious approach by the central bank amid global uncertainties. Despite the unchanged benchmark, commercial banks have lowered their lending rates. Between March and September, the average lending rate dropped from above 18% to about 15.9%. He noted that this average includes older loans booked at higher rates, while new loans now attract rates between 9% and 12%.
“This decline is significant compared with lending conditions a year to 18 months ago,” Mr Awuah said. He argued that this shows lending costs can fall even when the policy rate is unchanged, as banks respond to broader economic conditions.
The CEO defended banks against criticism that they are reluctant to lend. “Contrary to perhaps public view that banks are not lending, there is actually evidence on the ground to suggest that banks are lending,” he said. He added that financial intermediation remains central to banks’ operations and that if risks were lower, banks would offer credit at even more competitive rates.
At the same time, Mr Awuah warned that Ghana’s high non-performing loan (NPL) ratio hinders the expansion of affordable credit. The sector’s NPL ratio stands at about 15.8%, compared with under 10% in Togo, under 7% in Côte d’Ivoire, and under 9% in Nigeria. He explained this in practical terms: “For every 100 cedis of your money that we give out, we are likely going to lose 16 cedis.”
This loss affects banks’ willingness and ability to lend, pushing interest rates higher. Mr Awuah called on policymakers to look beyond simple comparisons of lending rates between countries and to address the underlying causes that make credit costly in Ghana.
One obstacle is the legal process for enforcing collateral. Although the Borrowers and Lenders Act provides a framework, legal challenges delay recovery. “A bank uses the Borrowers and Lenders Act, notifies the collateral registry, notifies the court that this customer has met all the conditions for recovery and therefore the underlying asset is going to be disposed of. What do we see? They run to the court,” he said.
He stressed that enforcing credit agreements efficiently is necessary to protect the banking system and free up funds for new borrowers. Without enforcement, the risks remain high and banks have to charge more to cover potential losses.
Mr Awuah also called for stronger cooperation among institutions involved in the business environment, including regulators, to fix structural issues that affect borrowers’ operations and loan repayments.
His comments suggest that while monetary policy influences lending rates, other factors like loan recovery and credit risk management also shape borrowing costs. The Bank of Ghana’s decision to hold the policy rate steady aims to track global developments, but banks have still found room to reduce rates amid improving conditions.
The challenge remains to bring down the high NPL ratio and streamline the legal process so banks can offer more affordable credit. Until then, borrowing costs will reflect the risks banks face in the Ghanaian market.
According to Joy Online.
