Why bank loans remain expensive despite Ghana’s lower policy rate
Ghana’s benchmark interest rates have fallen sharply, but the full cost of borrowing remains higher for some households and businesses because banks add customer-specific risks and charges when pricing loans.
The Bank of Ghana maintained its monetary policy rate at 14% in July 2026.
However, the policy rate is not the interest rate commercial banks must charge their customers. It is the central bank’s principal tool for influencing inflation, liquidity and general interest-rate conditions.
Commercial banks price their loans using the Ghana Reference Rate as a base.
They may then add risk premiums and other bank-specific charges, meaning the final rate offered to a customer can be considerably different from the central bank’s policy rate.
Lending rates have fallen
Bank of Ghana data show that borrowing conditions have improved considerably over the past year.
The Ghana Reference Rate fell to 10% in June 2026, from 23.8% in June 2025.
The average lending rate across the banking industry also declined from 27% to 15.6% over the same period.
The figures show that banks have reduced their lending rates in response to improving economic and financial conditions.
However, the 15.6% figure is an industry average. It does not mean that every household or business can borrow at that rate.
The Bank of Ghana says the rate offered to a customer can vary according to the lender’s assessment of the borrower’s circumstances.
Policy rate does not determine the final loan price
The distinction between the policy rate and the final cost of a bank loan is central to understanding why borrowers may not experience the same level of reduction.
The policy rate signals the direction of monetary policy and influences interest rates within the financial system. Banks, however, retain responsibility for assessing individual loan applications and pricing the associated risks.
A reduction in the policy rate can help bring down borrowing costs, but it does not remove the possibility that a borrower will default.
The Bank of Ghana has identified high non-performing loans and the risk profiles of borrowers as major factors contributing to the difference between
the Ghana Reference Rate and average lending rates.
Bad loans continue to affect borrowing costs
Non-performing loans remain one of the biggest challenges confronting Ghana’s banking industry.
The banking sector’s non-performing loan ratio declined from 23.1% in June 2025 to 16.1% in June 2026, according to the Bank of Ghana.
Although that represents significant progress, the central bank says the current level remains too high.
Bank of Ghana Governor Johnson Asiama has said high non-performing loans tie up banks’ capital, increase recovery costs and restrict the availability of new credit, particularly for smaller and higher-risk borrowers.
These risks influence the additional amount banks place on top of the Ghana
Reference Rate when pricing individual loans.
The central bank has consequently directed regulated financial institutions to reduce their non-performing loan ratios to no more than 10% by the end of December 2026.
The measures include stronger credit assessments, board-approved plans for reducing bad loans, improved recovery systems and the write-off of loans that have been fully provided for and have no realistic prospect of recovery.
The headline rate may not show the full cost
Another important measure is the annual percentage rate, commonly known as the APR.
The Bank of Ghana describes the APR as reflecting the true cost a customer faces when obtaining a loan.
It includes the Ghana Reference Rate, the bank’s risk premium and other bank-specific charges. The APR can therefore be higher than the interest rate highlighted when a loan is being marketed.
The central bank also cautions that published APRs are indicative. The actual APR offered to a customer may be different because it depends on the bank’s assessment of the borrower’s circumstances.
Borrowers should therefore compare the APR and total repayment amount, rather than relying only on the advertised interest rate.
Credit to businesses and households is growing
Lower rates appear to have contributed to increased lending.
Private-sector credit grew by 41.2% in June 2026, compared with growth of 8.6% in June 2025. When adjusted for inflation, private-sector credit increased by 34.1%.
The Bank of Ghana attributed the expansion to reduced borrowing costs and stronger demand for credit.
This suggests that the transmission of lower interest rates is taking place, although the cost and availability of loans may differ among customers.
What must happen next?
The prospects for cheaper loans will partly depend on whether banks can further reduce non-performing loans and improve the assessment of borrowers.
The Bank of Ghana says it is strengthening Ghana’s credit-reporting and collateral-registry frameworks. The objective is to reduce information gaps,
improve the evaluation of borrowers and make the recovery of collateral more effective.
Further reductions in bad loans could lower the risks banks attach to new credit and help narrow the difference between reference rates and the final rates customers receive.
For now, the evidence shows that borrowing costs have fallen significantly—but not every customer will receive the average lending rate.
The policy rate may influence the direction of interest rates, but the final cost of a loan still includes the bank’s assessment of the borrower’s risk and other charges associated with the facility.
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