Ghana’s key benchmark for setting the price of loans, the Ghana Reference Rate (GRR), has dropped like a stone this year. Since January, it has fallen by about a massive 33%, tumbling from 29.72% to 23.69% by June and then sinking further to 19.67% in August. In theory, this should have been good news for businesses and ordinary borrowers, because the GRR is meant to guide how much banks charge when they lend.
But here’s the problem: lending rates haven’t really moved. Banks are still charging almost the same painful rates they were at the start of the year. The average lending rate has only slipped from 30.07% in January to 27.00% in June – a small 10% drop that hardly matches the sharp fall in the GRR.
This gap between falling benchmarks and sticky lending rates matters, because it’s holding back the flow of credit that Ghana’s economy badly needs. Private sector credit, basically the loans businesses and households rely on to grow, invest, and spend, is stuck in the middle of this mismatch.
The past year has been a story of two very different halves. In 2024 and the early months of 2025, conditions were tight. Inflation was eating away at purchasing power, banks were cautious, and borrowing wasn’t easy. But now the tide seems to be turning. Inflation is cooling, interest rates are falling, and the Bank of Ghana is sending clear signals that it wants cheaper credit to reach the economy.
The numbers tell the story. From June 2024 to June 2025, the amount of loans given to the private sector – the nominal value, climbed from GH¢78.1 billion to GH¢89.1 billion by January 2025. But by May it had slid to GH¢82.4 billion before inching back up to GH¢84.8 billion in June.
On the surface, loans were still growing, but after adjusting for inflation, the picture looked worse: real private sector credit steadily shrank, and by June it was contracting by 4.5% a year. In plain terms, every cedi borrowed bought less, a hidden squeeze on businesses and consumers, even as banks kept lending.
Interest rates across the financial system explain a lot of this. The interbank rate, what banks charge each other for short-term funds, barely moved, holding around 27% through the first half of 2025. But government securities saw a dramatic shift. The 91-day Treasury bill rate, one of the most important benchmarks for all borrowing costs, collapsed from 28.37% in January to 14.74% by June, and then dropped again to just 10.3% at the start of August. Six- and twelve-month T-bill rates fell just as sharply.
For banks, this was a big deal. T-bills had been a safe, high-yield place to park money. Now they no longer offer those fat returns, leaving banks looking for new ways to put their funds to work.
The Bank of Ghana has been pushing in the same direction. The Monetary Policy Rate – the central bank’s main tool for controlling the cost of borrowing, stayed at 27% through March, ticked up slightly in April, and then, in a bold move in late July, was cut by 300 basis points to 25%. Together with falling T-bill rates, that sent a clear message: credit needs to flow, and it needs to be cheaper.
The GRR, which mixes the MPR, interbank rates, and T-bill rates to set the base for bank lending, responded exactly as expected – sliding from 29.72% in January to 23.69% in June, and now dipping below 20% in August.
Yet the average lending rate hasn’t kept pace. It has only eased from 30.07% in January to 27.00% by June – a tiny drop compared to the huge fall in the GRR and Treasury yields. Banks, still scarred by years of bad loans and worried about risk, have been slow to pass on the savings.
But they won’t be able to hold out forever. With government borrowing costs now at historic lows, banks have fewer safe places to stash their money. The private sector is the only real destination for their funds, and all the key signals – the MPR, GRR, interbank rates, and Treasury bill yields, are pointing down. Lending rates are almost certain to follow in the weeks ahead.
If they do, the impact could be huge. More loans could start flowing again in the second half of 2025. And this time, it wouldn’t just be more loans on paper, it would be loans that hold their purchasing power, helping businesses buy machinery, hire workers, and expand.
But there are risks. If too much cheap credit floods the system too quickly, it could spark inflation all over again, undoing the progress the central bank has made. Cheaper loans could also fuel a surge in imports, which might weaken the cedi if foreign exchange earnings don’t keep up. And there’s always the danger that borrowers could overextend themselves, leading to more bad loans for banks and forcing them to slam the brakes once again.
Right now, Ghana is at a delicate turning point. Rates have fallen sharply, the policy rate has been cut, and inflation is easing. The conditions for a new wave of credit are in place. But until banks finally bring down their lending rates in line with the GRR, the promise of cheaper credit will stay on paper, and businesses and consumers will keep waiting for real relief.
