Individuals and businesses anticipating a reduction in the cost of credit can now heave a sigh of relief as the Ghana Reference Rate (GRR) has steadily declined to hit an all-time low of 19.67% in August 2025.
The Ghana Reference Rate (GRR) is the standard base rate at which commercial banks determine lending rates.
After months of continuous disinflation and stable exchange, the rate, which started 2025 at 29.72% in January, has now significantly declined to 19.67% offering hope for businesses and individuals seeking to borrow from the financial institutions.
This marks a significant 6-percentage point drop in just half a year. The latest drop from 23.69% in July to 19.67% in August is not accidental.
It mirrors improvements in macroeconomic indicators, including slowing inflation and a relatively stable cedi, but most notably reflects the latest policy direction by the Bank of Ghana (BoG) to cut the policy rate by 300 basis points, from 28% to 25%.
What is the Ghana Reference Rate?
The GRR, introduced by the Bank of Ghana in 2018 in collaboration with the Ghana Association of Banks, serves as a standardized benchmark to guide banks in setting lending rates.
It is a composite rate derived from the policy rate, interbank rate, 91-day Treasury bill rate, and the weighted average cost of funds of banks. Each month, the GRR is published by the Ghana Association of Banks, effectively acting as the base upon which commercial banks add their risk premiums to price loans.
Why This Decline Matters
For the average Ghanaian and businesses alike, the drop in the GRR is more than just a statistic. It directly influences the cost of borrowing. Lower reference rates typically translate to lower interest rates on loans, whether for SMEs seeking working capital, homeowners refinancing mortgages, or individuals applying for personal credit.
The MPR-GRR Nexus: Cause and Effect
The latest reduction in the GRR is an indication that the 300 basis point Monetary Policy Rate cut by the Bank of Ghana is already passing through the financial system.
As a core input in the GRR calculation, the MPR’s reduction provides downward pressure on the GRR, which in turn drags down the average lending rates.
However, experts caution that banks may not always respond proportionately or immediately. Some may maintain higher spreads due to perceived credit risk or cost of funds.
Nonetheless, the GRR offers transparency and consistency in pricing loans across the sector.
The Road Ahead
With evidence of the policy rate cut passing through the system, borrowers can expect lending rates to follow suit in the near future. If inflation continues to cool, currently projected to drop below 11.9% by year-end, and the cedi holds its ground, more cuts in the MPR may follow, accelerating a further fall in the MPR and then in the GRR till it reaches businesses and individuals.
Such a trajectory could further ease access to credit and stimulate economic activity. However, the real test lies in how commercial banks adjust their risk premiums
