Bank lending benchmark rate drops 57% in one year

Ghana’s benchmark for pricing bank loans has dropped by about 57% in one year, significantly lowering the base cost used by banks to price credit to businesses and households.

The Ghana Reference Rate (GRR) declined to 10.18% in September 2026 from 23.80 percent a year earlier, representing a 13.62 percentage-point reduction within 12 months.

The latest rate is also down from 10.61% in August, extending the decline in the benchmark as Treasury bill yields and other money-market rates remain considerably below levels recorded last year.

The reduction provides businesses seeking new financing with a substantially lower starting point for negotiating bank loans, although the final rate paid by individual borrowers will continue to reflect their risk profile and the margins applied by banks.

The GRR is used by commercial banks as the common base for pricing cedi-denominated loans. Individual banks apply risk premiums and other pricing considerations to arrive at the final lending rate offered to customers.

The 57% decline has been accompanied by a sharp reduction in actual lending rates across the banking industry.

Average bank lending rates have fallen from around 27% a year ago to about 15%, providing further relief to companies that faced borrowing costs exceeding 30% during the previous high-interest-rate environment.

The latest movement in the GRR was supported by another decline in the 91-day Treasury bill rate, one of the key components used in determining the benchmark.

The 91-day Treasury bill component fell to 4.8856% from 5.7881%, while the interbank overnight rate eased marginally to 10.20 percent from 10.23%.

The lower Treasury bill rate has also changed the investment environment for banks, which previously had the option of placing substantial liquidity in high-yielding government securities instead of extending credit to businesses.

With short-term government securities now yielding considerably less, banks have increased lending as they seek alternative opportunities to deploy funds.

Private-sector credit expanded 41.2% year-on-year in June 2026, compared with growth of 8.6% in June 2025. In real terms, credit to the private sector increased 34.1%.

The expansion shows a strong return of bank credit to businesses and households following the improvement in financial conditions and the decline in interest rates.

Total bank advances also increased to GH¢124.3 billion in June 2026 from GH¢89.7 billion a year earlier, representing growth of 38.6%.

The lower reference rate does not mean borrowers will automatically obtain loans at 10.185.

Banks price individual facilities by applying premiums based on factors including the borrower’s credit history, collateral, sector, repayment capacity, tenor and overall risk.

Standard Chartered Ghana, for instance, publishes assessed risk premiums ranging from 5% to 10.63% for retail banking and zero to 10% for commercial banking. Global banking customers attract premiums ranging from minus 2% to 9.18%.

The differences mean businesses with stronger balance sheets and lower credit risks are better positioned to obtain financing closer to the reference rate, while SMEs and borrowers considered relatively risky could continue to pay substantially higher rates.

The decline in the GRR nevertheless strengthens the case for further reductions in commercial lending rates, particularly as banks operate with lower money-market rates than prevailed a year ago.

Bank of Ghana Governor Dr Johnson Pandit Asiama has urged banks to increase financing to the productive sectors as monetary conditions improve, with particular attention to small and medium-sized enterprises and agriculture.

The central bank has indicated that falling money-market rates are already translating into stronger private-sector credit, but the distribution of the additional lending remains important to the broader economic impact.

Agriculture and manufacturing continue to receive relatively small portions of private-sector credit despite their role in government’s industrialization, export and import-substitution programmes.

At the end of 2025, manufacturing accounted for about 11.1% of outstanding private-sector credit, while agriculture, forestry and fisheries received about 4.5%.

Lower borrowing costs could provide banks with greater room to expand financing to these sectors, particularly where companies previously postponed investments because of high interest charges.

The decline also has implications for existing borrowers with loans priced directly against the GRR.

Businesses with variable-rate facilities could benefit from lower interest charges as their facilities are re priced, depending on the reset periods and conditions contained in their loan agreements. Fixed-rate borrowers would generally remain on their contracted rates until the facilities mature or are renegotiated.

The GRR’s fall from 23.80% to 10.18% therefore marks a major change in Ghana’s credit environment after several years of high borrowing costs constrained investment and increased financing expenses for businesses.