Accra:Small and medium-sized enterprises (SMEs) in Ghana continue to encounter borrowing costs exceeding 30 percent on some bank loans, despite a notable decline in benchmark interest rates. This situation underscores ongoing structural issues within the country's credit market.
According to Ghana Web, the disparity between policy rates and the actual borrowing costs is due to a variety of factors. These include credit risk premiums, banks' funding expenses, operating costs, capital requirements, and the limited financial records available for many smaller businesses.
Average commercial bank lending rates decreased from 20.58 percent at the start of 2026 to 15.94 percent by mid-October. Concurrently, the Ghana Reference Rate (GRR), which serves as a base rate for bank lending, dropped from 15.68 percent to 10.04 percent. The Monetary Policy Rate (MPR) also decreased from 15.50 percent to 14 percent during the year, following significant monetary easing in the latter half of 2025.
The figures reveal that average lending rates have adjusted more rapidly than the MPR this year. However, the gap between the average lending rate and the GRR widened from 4.90 percentage points in January to 5.90 percentage points, emphasizing why reductions in benchmark rates do not automatically result in savings for borrowers.
Enterprises with reliable cash flows, audited accounts, strong repayment histories, and valuable collateral are generally in a better position to secure favorable lending terms. In contrast, smaller businesses with inconsistent sales, limited security, and weak financial documentation may face higher rates or difficulties in accessing formal bank credit.
The Bank of Ghana (BoG) has identified incomplete transmission of monetary policy due to structural and market-specific constraints such as weak borrower information, high perceived default risks, collateral enforcement challenges, and slow deposit repricing. In response, the central bank has proposed a Credit Risk Management Directive to enhance credit assessment and early identification of problem loans. This draft, open for public and industry comments until November 30, aims to establish consistent standards for regulated financial institutions.
The BoG also aims to reduce commercial banks' non-performing loan ratios to 10 percent or below by the end of 2026, as part of efforts to strengthen balance sheets and improve credit discipline. Meanwhile, businesses are working to enhance their credit profiles through better financial records, credit-reference systems, and risk-sharing arrangements. Industry groups are also negotiating with lenders over additional charges that increase the effective cost of borrowing.
Banks are under pressure to balance lending to productive sectors with the need to maintain asset quality and adequate returns. The central bank anticipates that stronger credit information systems, improved collateral enforcement, and sustained macroeconomic stability will enhance the transmission of policy-rate changes to borrowing costs. However, until these constraints are addressed, lower benchmark rates alone may not ensure affordable financing for smaller businesses, which remain highly exposed to high credit costs.