Bank lending rates have fallen sharply over the past 26 years, reducing the cost of credit for businesses but financial experts say banks must now lend more to productive sectors to support economic growth.
The average commercial bank lending rate fell from 47 per cent in October 2001 to 15.94 per cent in August 2026, while the average rate paid on ordinary savings deposits declined from 15.5 per cent to 4.10 per cent over the same period.
An analysis of the Bank of Ghana (BoG) data by data analyst, Bernard Obeng Boateng, showed that the gap between lending and savings rates had narrowed from 31.5 percentage points to 11.84 percentage points.
The decline in borrowing costs has coincided with lower inflation, falling treasury bill yields and reductions in the monetary policy rate. However, experts say the benefits will depend on whether businesses can access affordable credit to expand production and create jobs.
What the data shows
Mr Boateng said the narrowing gap largely reflected the faster decline in lending rates rather than improved returns for ordinary savers.
“The cost of borrowing has fallen much faster than the return on ordinary savings. The spread is now narrower, but that does not necessarily mean banks are making the same amount of money from the difference,” he said.
The average lending rate fell from 20.58 per cent in January 2026 to 15.94 per cent in August, while the average savings rate remained at 4.10 per cent.
The BoG data also showed that the 91-day treasury bill rate declined to 5.38 per cent in August 2026, from 10.26 per cent a year earlier.
Mr Boateng cautioned that the average lending rate did not mean every borrower could secure a loan at that rate, since the actual cost depended on the borrower's risk profile and loan terms.
He said the key measure of progress would be whether lower rates translated into increased credit for businesses and productive investment.
“The real test is not just whether the spread is narrowing. It is whether businesses can access funds, expand production and invest,” he said.
Why rates are falling
A Banking Consultant, Dr Richmond Atuahene, said the decline in lending rates was closely linked to movements in treasury yields, monetary policy and government borrowing.
“When Treasury rates come down, bank lending rates also come under pressure to fall. The monetary policy rate influences treasury rates, which then affect the cost of borrowing from banks,” he said.
The BoG reduced its policy rate to 14 per cent in March 2026 and maintained it through September. Inflation stood at 5.2 per cent in September, according to the Ghana Statistical Service.
Dr Atuahene said lower returns on government securities also changed banks' incentives. Previously, banks could earn returns from lending to the government without having to seek out private-sector borrowers.
“Banks could buy government securities and make money without going out to find borrowers. Now, the system is pushing them to do proper banking and find businesses that need money,” he said.
Banks must find borrowers
Dr Atuahene said the decline in lending rates offered businesses better borrowing conditions than during periods when commercial lending rates had reached 28, 36 and 40 per cent.
“If a business can borrow at 13, 14, 15 or 20 per cent, that is better than borrowing at 28, 36 or 40 per cent. But the money must go into productive activities,” he said.
He said the economy needed more productive businesses capable of absorbing available credit and generating returns to repay loans.
According to him, banks continued to finance trade and imports, while productive sectors such as agriculture received comparatively limited financing.
“When the government is not borrowing heavily from the market, banks have to look elsewhere for returns. That means finding businesses and individuals who need financing,” he said.
The shift, he said, should encourage banks to assess viable businesses and finance investments that increase production rather than rely heavily on government securities.
Savers still face low returns
Financial markets expert, Norman Adu Bamfo, said the narrowing gap had reduced the cost of borrowing in percentage-point terms, but the improvement had not been shared equally by borrowers and savers.
He said that although the lending-savings gap had fallen from 31.5 percentage points in 2001 to 11.84 percentage points in August 2026, the lending rate was now almost four times the savings rate.
With ordinary savings earning 4.10 per cent against inflation of 5.2 per cent in September, depositors faced a negative real return if inflation remained above the interest they earned.
Mr Bamfo said the gap also reflected risks and inefficiencies in the banking system, including non-performing loans, which could lead banks to charge other borrowers more to compensate for losses.
He identified sustained low inflation, fiscal discipline, better credit information and faster enforcement of loan agreements as important measures to reduce borrowing costs further.
He also called for greater competition and transparency in deposit pricing so that savers could benefit more from changes in market conditions.
The experts said the next challenge was to ensure that lower borrowing costs supported business expansion while improved competition helped savers earn better returns. For banks, reduced returns on government securities meant that lending to viable private-sector businesses would become increasingly important to earnings and economic growth.