Ghana’s banking industry is betting on lower lending rates to ease the burden on borrowers and rein in rising defaults, as the financial sector seeks to reposition itself in support of economic recovery.
The Ghana Association of Banks (GAB) says the sharp drop in the Ghana Reference Rate (GRR) to 19.67% in August 2025 down from 29.72% in January together with the Bank of Ghana’s recent policy rate cut to 25%, presents an opportunity to boost credit growth while improving loan repayment performance. Non-performing loans (NPLs) currently stand at 22%, posing a major challenge to financial stability.
The remarks come on the back of a call by Governor Dr. Johnson Asiama for lenders to shift away from their traditional reliance on government securities and channel more funds into productive sectors of the economy. With inflation easing and the cedi relatively stable, policymakers are pressing banks to take on a more active role in supporting private sector growth.
Chief Executive Officer of the Ghana Association of Banks, John Awuah, in an interview noted that cheaper credit could help improve asset quality but stressed the need for regulators, policymakers, and businesses alike to play their part in reducing risks.
“Banks have always been ready. With default rates where they are, you can be as ready as you like but if you are confronted with a 22% non-performing loan ratio, you will also be careful. You are playing with depositors’ money, and you don’t want to be throwing money out when the expectation for recovery is that low,” Mr. Awuah explained.
“Banks want to lend, but if the environment doesn’t foster lending in a bid to protect depositors’ funds, we will be careful. We hold the view that higher lending rates also contribute to higher default rates because the facility becomes unaffordable. If the rate comes down and the lending follows in tandem, then the propensity to perform on the loan will be enhanced.” He added
The GRR’s decline of more than 10 percentage points since January marks one of the steepest drops in recent years. For comparison, the same period in 2024 saw rates remain stubbornly above 29%. Analysts say the latest trend reflects improved macroeconomic stability, declining inflation, and a decisive easing stance by the Bank of Ghana’s Monetary Policy Committee, which recently trimmed the policy rate from 28% to 25%.
Economists, however, caution that while lower interest rates could help reduce loan defaults, the real test will be whether banks extend affordable credit to productive sectors without compromising prudence. As Ghana navigates a fragile recovery, striking the balance between credit expansion and financial stability will determine how well the banking sector can support sustainable growth.
