Even though the Bank of Ghana has cut its benchmark monetary policy rate sharply in recent months, small- and medium-sized enterprises (SMEs) in Ghana continue to face prohibitively high borrowing costs. This persistent mismatch between policy easing and actual lending rates is limiting business growth, stifling job creation, and undermining the role of SMEs as engines of economic transformation.
In July 2025, the Bank of Ghana reduced its policy rate by 300 basis points, bringing it down from 28 percent to 25 percent. Analysts and business advocates had hoped the cut would translate into cheaper loans for SMEs. Instead, according to the Bank of Ghana’s own data, annual percentage rates (APRs) for SME loans remain volatile, with some banks charging more than 45 percent.
A Bank of Ghana report published in August 2025 reveals a stark disparity in borrowing costs. For one-year SME facilities, the lowest APR recorded was 17.03 percent (offered by Absa Bank Ghana), while at the higher end, some institutions charged up to 45.13 percent. According to the same report, many banks do not extend three- or five-year loans to SMEs, depriving them of the long-term capital required for expansion.
This reality has raised serious concerns among SME advocates and investors. The Ghana Chamber of Young Entrepreneurs (GCYE) has publicly criticized the high cost of credit, arguing that these rates undermine the ability of small businesses to invest in growth. According to the group, high borrowing costs reduce working capital, squeeze margins, and limit expansion.
Experts say several structural factors are driving the disconnect between policy rate cuts and high lending rates. One weak link is collateral. Many SMEs, especially informal ones, do not possess the real estate assets banks traditionally require. Although reforms have been introduced to accept movable collateral such as equipment or inventory, uptake remains low due to limited awareness and complex registration processes.
Financial institutions add that lending to SMEs is riskier. Without reliable accounting records or credit histories, small businesses are often assessed by banks as high-risk borrowers. Many SMEs operate informally, do not file audited statements and lack formal governance structures, making it difficult for lenders to underwrite loans with confidence.
The short tenors on most SME loans compound the burden. Banks rarely offer terms longer than three years, which is insufficient for businesses that need patient capital to acquire equipment, scale operations or launch new products.
The failure of rate cuts to reach lending markets in a meaningful way has broader economic implications. SMEs are central to Ghana’s non-oil economy. According to the British International Investment Report, only about half of Ghana’s SMEs have ever accessed formal credit. Without affordable and reliable funding, many SMEs remain stuck in survival mode rather than scaling up, limiting their potential contribution to GDP growth and job creation.
Beyond the cost of debt, financial literacy is another major barrier. Many business owners struggle with record-keeping, separating their personal and business finances, and preparing credible financial forecasts. These weaknesses make it harder for lenders to assess viability and exacerbate perceptions of SME risk.
There is also a race against informality. The majority of Ghana’s SMEs operate outside formal structures. Informal firms are less likely to register with the credit registry, maintain audited accounts, or pledge assets. Without these, they are excluded from many formal financing opportunities.
Analysts argue that to close this gap, public and private stakeholders must act decisively. The International Finance Corporation (IFC) and other development partners have recommended risk-sharing mechanisms and credit guarantee schemes that could reduce banks’ exposure to SME risk. These instruments would help incentivize lending to high-potential small businesses that currently struggle to meet traditional banking conditions.
There is also a call for greater awareness and use of movable collateral mechanisms. The Bank of Ghana has supported reforms, but more education is needed so small business owners can tap into this option. Enhancing business registration, digital record-keeping, and financial sophistication among SMEs will also help close the gap between demand and supply of capital.
Advocacy groups such as the GCYE are urging the government and regulators to push banks to align their lending rates with the more accommodative policy environment. They want long-term, sector-specific credit lines and a transparent, standardized lending framework that reflects the reduced risk in the broader economy.
The cost of the capital crisis in Ghana is not just a banking issue, it is a development challenge. Unless lending costs for SMEs come down meaningfully and credit terms improve, the rapid rate cuts by the central bank may remain symbolic, offering little real relief to the business owners who matter most to Ghana’s economic future.
