Lending rates remain elevated at 19.7% despite policy easing

Ghana’s lending rates are showing signs of moderation, but the pace of decline remains slower than market expectations, raising concerns about the transmission of monetary policy to the real economy.

Latest data from the Bank of Ghana indicates that the average lending rate fell to 19.7% in February 2026, a significant drop from 30.12% recorded in February 2025.

While this marks a notable year-on-year improvement, analysts argue that borrowing costs remain elevated relative to prevailing macroeconomic conditions.

A closer look at the trend in 2025 shows a gradual but uneven decline. The average lending rate eased from 29.18% in March 2025 to 27.40% in April, and further to 26.90% in May.

However, the trajectory was briefly interrupted in June, when rates edged up to 27.0%, before resuming a downward trend to 26.59% in July, eventually dropping sharply to 20.45% by December 2025.

Despite this consistent easing, the current rate still exceeds expectations, particularly against the backdrop of a sharp decline in government securities yields to single-digit levels.

Market watchers had anticipated a more aggressive reduction in lending rates, reflecting improved liquidity conditions and reduced risk premiums.

Supporting this expectation is the significant drop in the Ghana Reference Rate, which declined to 14.58% in February 2026, from 29.96% a year earlier.

The benchmark is a key guide for pricing loans and typically signals the direction of borrowing costs within the banking sector.

The central bank’s policy stance has also shifted in response to improving macroeconomic fundamentals. In January 2025, the Bank of Ghana reduced its policy rate to 15.50% from 18%, citing easing inflationary pressures, sustained fiscal consolidation, and a stronger external reserves position.

However, the relatively slow pass-through of these policy gains to lending rates highlights structural rigidities within the banking sector. Credit pricing continues to reflect high perceived risks, operational costs, and sector-specific vulnerabilities.

As a result, lending rates remain highly differentiated across banks and industries. While some financial institutions price loans close to the Ghana Reference Rate, others continue to charge rates as high as 28%, depending largely on borrower risk profiles.

The persistence of relatively high borrowing costs poses a challenge to private sector growth, particularly for small and medium-sized enterprises that rely heavily on bank credit.

It also raises critical questions about the effectiveness of monetary policy transmission and the extent to which improved macroeconomic conditions are benefiting businesses and households.