Average lending rate rises to 31.78% at end-August 2023

Average rates on loans given to individuals and businesses by banks in the country stand at 31.78% at end-August 2023.

This is on the account of increments in the Bank of Ghana’s policy rate which subsequently leads to an increase in the Ghana Reference Rate (GRR) and risk assessment charges on borrowers.

The rise in the average lending rate marks a 3.82% (382bps) year-on-year (YoY) increment in interest rates when compared to the 27.96% average lending rate at end-August 2022.

The 382bps increment in the average lending rate is primarily driven by increments in the benchmark monetary policy rates set by the Bank of Ghana (BoG) and subsequently the Ghana Reference Rate (GRR).

Bank of Ghana’s monetary policy rate currently stands at 30% following a 8,000bps (8%) increment in the prime rate by the apex bank.

On the back of the increment in the prime rate, the GRR also on a YoY basis grew from 24.23% at end-August 2022 to 29.28% at end-August 2023.

The rise in average lending rate means high cost of borrowing by individuals and particularly businesses which translates into high cost of doing business.

The high average lending rate also makes it difficult for businesses and individuals to pay back loans taken from banks thereby potentially increasing gross non-performing loan ratios of banks in the country.