Ghana’s financial landscape is currently experiencing a paradox of lower macroeconomic indicators; however, the cost of credit remains relatively high.
The Bank of Ghana has consistently lowered the “official” price of money, with the Monetary Policy Rate at 14.0% and the Ghana Reference Rate (GRR) following suit, sliding to 10.03%.
Yet, for businesses and households, bank loans still feel like a luxury they can barely afford.
Banking expert Dr. Richmond Atuahene argues that simply lowering the policy rate isn’t enough to fix the “fever” of high lending rates. To truly bridge the gap between falling official rates and the high double-digit interest rates banks charge, he has laid out a comprehensive roadmap for reform that requires action from the regulator, the banks, and the borrowers themselves.
Banks: Aligning with Reality
The most immediate fix, according to Dr. Atuahene, is for commercial banks to align their internal base rates closely with the declining Ghana Reference Rate (GRR).
Currently, there is a disconnect where the GRR falls, but bank rates stay high. He urges banks to adopt more competitive interest rates, both fixed and fluctuating, as their own cost of funds drops.
Most importantly, he suggests that banks should help their clients refinance expensive old loans, allowing businesses to swap high-interest debt for the new, lower-cost credit.
The Regulator: Unlocking the “Trapped” Cash
A major reason banks claim they can’t lower rates is that too much of their money is locked away. Dr. Atuahene calls on the Bank of Ghana to reduce the Cash Reserve Requirement (CRR).
He believes that by lowering the amount of cash banks must hold at the Central Bank for zero interest, the regulator would free up more funds for the private sector, naturally driving down the cost of credit through increased supply.
Borrowers: Clean Up Your Books
Affordable credit is a two-way street. Dr. Atuahene highlights that Small and Medium Enterprises (SMEs) must improve their financial disclosures and strengthen the quality of their collateral.
The experienced banker explains that when a business has transparent records, it reduces the risk premium a bank adds to the loan. To help this process, he recommends that banks leverage fintech and digital platforms to assess credit risk more efficiently, especially for underserved smaller entities.
Strategic Lending: Bet on Growth Sectors
Rather than just lending to anyone, Dr. Atuahene suggests that financial institutions should prioritize high-growth sectors like manufacturing and agriculture.
By targeting these areas, banks can drive sustainable economic growth, which improves the overall health of the economy and reduces the likelihood of defaults. To ensure long-term stability, he also advises banks to use this recovery period to build Macro-prudential Capital Buffers, such as Capital Conservation Buffers (CCoB), to protect against future shocks.
The Government: Stay Disciplined
Finally, Dr. Atuahene’s prescription includes advice for the government. While falling interest rates are good for growth, they can lead to inflation if not managed carefully. Dr. Atuahene insists on maintaining zero monetary financing and strictly aligning fiscal consolidation.
In simpler terms, the government must avoid printing money to fund its spending, ensuring that the benefits of lower interest rates aren’t wiped out by a new wave of rising prices.
The Bottomline
For Dr. Atuahene, lowering the policy rates was the first step; however, his recommendations suggest that the real work of unlocking liquidity, embracing technology, and enforcing discipline, among others, is very critical for the affordable cost of credit.
