Hope for businesses, households: Lending rates set to drop to 17%
LENDING rates are expected to ease from 23 per cent to about 17 per cent in the coming days following a sharp decline in the Ghana Reference Rate (GRR), which dropped to 14.58 per cent early this month from 29.73 per cent in early 2025.
Though still high, the development will offer critical relief after months of tight credit conditions that constrained business expansion and household borrowing.
Lower lending rates will enable businesses to access cheaper credit for expansion, inventory financing, and operational scaling, potentially boosting employment and economic activity.
On the other hand, households would obtain more affordable loans for mortgages, education, and consumption, easing financial pressures on families.
The Chief Executive Officer (CEO) of the Ghana Association of Bankers (GAB), John Awuah, in an interview with the Graphic Business attributed the GRR decline to Bank of Ghana’s (BoG) policy actions, falling inflation, and forex market stability.
His comments come amid growing public concern that lending rates remain relatively high despite a sharp drop in inflation and recent reductions in benchmark interest rates.
The policy rate fell 250 basis points during the review period, pushing the reference rate down 110 basis points.
However, Mr Awuah cautioned that lending rates vary by borrower risk profile, one customer may secure a loan at 17 per cent while another pays 20-23 per cent.
“As the Ghana Reference Rate declines, lending rates are also expected to reduce, and that is what we have seen over the last few months,” he stated.
“Beyond the cost of funds, lending rates include a risk premium. Depending on a customer’s credit profile, one borrower may obtain a loan at 17 per cent, while another may be charged 20 or 23 per cent. There cannot be a single lending rate for all customers,” Mr Awuah said.
Business confidence
On the response from the business community, he said the decline in borrowing costs had been positive, noting that lower financing costs, coupled with easing inflation and improved foreign exchange stability, were strengthening business confidence.
“If these macroeconomic improvements are sustained, businesses are likely to become more bullish and seek credit for expansion and scaling up,” he said.
NPLs
Touching on the banking sector, the CEO said lower lending rates could help reduce Non-Performing Loans (NPLs), as borrowers would find it easier to service their obligations.
However, he noted that loan performance was also influenced by broader economic and market conditions.
Recalibration
Meanwhile, in a separate interview, a Professor of Finance at the University of Ghana Business School, Prof. Godfred Bokpin, expressed concern about the wide gap between inflation and interest rates, pointing out that the BoG’s policy rate of 15.5 per cent and the GRR of 14.58 per cent remain high relative to current inflation levels.
“This tells us that the pace of disinflation is much faster than other economic variables are able to track,” he said, adding that such conditions tend to restrict credit expansion and private sector activity.
He explained that credit growth slowed markedly in 2025, limiting business expansion and investment, while employment figures showed little change between 2024 and 2025.
“The disinflation we are celebrating has not come with sufficient job creation; a certain level of inflation is good for the economy. It supports manufacturing and productivity,” he said, warning that persistently low inflation could encourage consumers to postpone spending in anticipation of further price reductions, thereby slowing production.
He therefore called on policymakers to shift focus from stabilisation alone to growth-enhancing measures, including improved access to credit and targeted support for productive sectors.
“With inflation this low, we must recalibrate our macroeconomic framework to aggressively support growth while maintaining price stability,” Prof. Bokpin added.
Projection
The sharp drop in inflation to 3.8 per cent, far below BoG’s medium-term target of eight per cent with a two per cent tolerance band, reinforces expectations of further easing in monetary conditions.
With the policy rate at 15.5 per cent and the GRR at 14.58 per cent, the wide gap between inflation and interest rates points to scope for a gradual reduction in borrowing costs.
However, the central bank is likely to proceed cautiously, balancing the need to stimulate credit growth and private sector activity with the imperative of maintaining price and exchange rate stability.