Ghana’s efforts to ease borrowing costs are delivering uneven results across the banking sector, with microfinance banks charging lending rates of approximately 31 to 40 percent even as universal banks report significantly lower rates.

Findings from the Chartered Institute of Bankers, Ghana (CIB Ghana) September Pre-Monetary Policy Committee (Pre-MPC) sentiment survey have exposed a widening gap in borrowing costs across different categories of financial institutions, raising fresh concerns about access to affordable credit for traders, small businesses and households.

The findings were presented at CIB Ghana’s third Post-MPC Policy Seminar, which brought together representatives from the Bank of Ghana (BoG), the Ministry of Finance, banks, industry and the trading community to examine monetary policy transmission, credit growth and non-performing loans (NPLs).

The discussions come after the Bank of Ghana’s Monetary Policy Committee (MPC) unanimously maintained the policy rate at 14.0 percent on September 24, following a series of reductions aimed at easing monetary conditions.

However, the latest industry survey suggests that improvements in monetary policy conditions are not reaching every borrower at the same speed, leaving smaller businesses exposed to considerably higher borrowing costs.

Microfinance Borrowers Continue to Face Expensive Credit

The survey revealed significant differences in lending rates across Ghana’s banking industry. Most universal banks surveyed reported lending rates between 10 and 15 percent, while 46 percent of community banks reported charging between 21 and 25 percent.

The situation was even more challenging among microfinance banks, where reported lending rates ranged from approximately 31 to 40 percent.

The figures highlight the difficulties smaller borrowers may encounter when seeking financing, particularly traders and businesses that depend on short-term loans to purchase inventory, meet operational expenses and sustain their activities.

High borrowing costs can also discourage businesses from expanding, limit their ability to employ additional workers and reduce the returns they earn from their investments.

While lower interest rates at universal banks suggest that some borrowers are benefiting from changing monetary conditions, the experience of customers relying on smaller financial institutions remains considerably different.

The disparity raises questions about how effectively monetary policy adjustments are translating into affordable financing across the wider economy.

Bank of Ghana Explains Why Rate Cuts Take Time

Governor of the Bank of Ghana, Dr. Johnson P. Asiama, explained that changes in the policy rate do not immediately translate into lower lending rates because banks consider several factors when determining their loan prices.

In remarks read on his behalf by the Bank’s Director of Research, Dr. Simon Harvey, the Governor emphasised the role of funding costs, credit risk, operating expenses and expected loan losses in determining the rates charged to customers. “This transmission is neither automatic nor instantaneous,” the Governor said.

He added that monetary policy was not simply about lowering interest rates but also about maintaining anchored inflation expectations, currency stability and sound financial institutions. “The objective is not simply to achieve lower interest rates,” he said.

The explanation highlights a key challenge facing policymakers. Although reductions in the policy rate can lower the benchmark cost of money in the economy, banks may remain cautious about passing on the full benefits when lending risks and other expenses remain elevated.

Borrowers, particularly those without substantial collateral or strong credit histories, may therefore continue to face expensive financing even when broader monetary conditions improve.

Banks Show Strong Appetite to Lend

Despite the differences in lending rates, the CIB Ghana survey revealed that banks generally remain willing to extend credit.

Presenting the findings, the Institute’s Chief Executive Officer, Mr. Robert Dzato, FCIB, said the survey pointed to strong lending appetite, although the transmission of monetary policy varied across different market segments.

“We see appetite to lend is quite high,” he said, noting that “the real impact of the transmission of monetary policy varies across the various segments.”

The findings suggest that credit availability alone may not be enough to stimulate business activity if the cost of borrowing remains prohibitive for significant sections of the market.

A business may qualify for a loan but still struggle to repay it if interest expenses consume a large share of its revenue. This is particularly relevant to traders whose operations depend on import shipments, inventory turnover and the timing of sales.

During the seminar’s panel discussion, President of the Ghana Union of Traders Association (GUTA), Mr. Clement Boateng, called for repayment arrangements, including grace periods, that reflect traders’ import cycles and shipping delays.

Such arrangements could help align loan repayments with actual business cash flows, reducing pressure on borrowers whose goods may take considerable time to arrive and generate revenue.

Rising Inflation Expectations Complicate the Outlook

The survey also revealed mixed views about Ghana’s economic prospects.

Approximately 65 percent of respondents expressed high confidence in the macroeconomic environment, while 80 percent considered the prevailing monetary policy stance effective in containing inflation.

However, 70 percent expected inflation to increase over the following three months, highlighting concerns that could complicate future monetary policy decisions.

Additionally, 86 percent of respondents expected the MPC to maintain the policy rate, matching the Committee’s eventual decision to hold it at 14.0 percent.

The anticipated inflation increase provides an important backdrop to the central bank’s cautious approach. Policymakers must balance the need to support economic activity with the risk that easing monetary conditions too quickly could undermine progress in controlling prices.

Bad Loans Remain a Major Banking Sector Concern

Beyond lending rates, the seminar placed considerable emphasis on the relationship between credit expansion and loan quality.

Mr. Dzato reported that 71 percent of surveyed banks were confident of meeting the Bank of Ghana’s directive to reduce NPLs to 10 percent by the end of 2026.

While the confidence expressed by banks was encouraging, he warned that expanding credit without effective monitoring and risk management could create fresh problems.

“We are driving credit growth for obvious reasons,” Mr. Dzato said, adding that loans that were not repaid on time could create another problem for the sector.

CIB Ghana Governing Council President, Dr. Mrs. Ellen Ohene-Afoakwa, FCIB, similarly stressed the need to balance lending expansion with responsible credit practices.

“As an institute, we recognise that credit growth and credit quality must move together,” she said.

Her remarks reinforce concerns that aggressive lending without proper assessment of borrowers’ repayment capacity could worsen bad loans and weaken banks’ financial positions.

Ghana’s challenge, therefore, extends beyond encouraging banks to lend more. Ensuring that businesses can access credit at reasonable rates, repay their obligations and expand sustainably will remain essential to making monetary policy benefits more widely felt.

The latest CIB Ghana findings expose the uneven journey from policy rate decisions to the borrowing costs faced by ordinary businesses. Until that transmission becomes more effective across different categories of financial institutions, many smaller borrowers could continue to face financing costs that undermine their ability to grow.