Commercial banks remain cautious about extending credit despite a sharp decline in lending rates, President of the Ghana Association of Banks (GAB), John Awuah, has stated.

According to him, Ghana currently records the highest non-performing loans (NPLs) ratio in the West African sub-region, hovering around 19 percent. He explained that such elevated default levels compel banks to adopt a defensive lending posture, often imposing strict conditions that make it difficult for small- and medium-sized enterprises (SMEs) to secure financing.

“For every GH¢100 you lend of depositors’ money, you are potentially going to lose GH¢19,” he said. “The credit culture is bad. There’s default everywhere — from individual level to household to business.”

Mr. Awuah emphasised that improving access to credit requires stronger collaboration between banks and state institutions to reduce default rates and strengthen the overall credit system.

He made the remarks during a high-level meeting with the Ghana National Chamber of Commerce and Industry (GNCCI) in Accra. The meeting was convened to address persistent concerns about access to finance for businesses.

President of GNCCI, Stephane Miezan, argued that businesses have not fully benefited from the aggressive policy rate cuts implemented by the Bank of Ghana (BoG). While interest rates have declined, he said many companies still face significant hurdles in obtaining loans.

“We keep saying that if interest rates go down and you can’t access loans, then it’s equally expensive,” he told journalists, noting that SMEs continue to navigate lengthy and cumbersome loan application processes.

The BoG has reduced its policy rate steadily over the past several months, cutting it by 300 basis points from 28 percent to 25 percent in July 2025 — the first major easing since the 2022 economic crisis. The central bank has sustained the easing cycle into 2026 amid declining inflation, lowering the policy rate further to 15.5 percent in January. Inflation stood at 3.8 percent in February.

Similarly, the Ghana Reference Rate — used by commercial banks to price loans — has dropped significantly, falling from 29.96 percent in February 2025 to 14.58 percent in February 2026. Analysts expect lending rates to decline further.

Despite these improvements in the cost of borrowing, GNCCI members maintain that structural barriers remain. High collateral requirements, prolonged approval timelines, and elevated rejection rates — particularly for SMEs in manufacturing and value addition — continue to constrain access to credit.

Some business owners at the meeting shared experiences of unsuccessful loan applications and proposed reforms, including decentralising banks’ loan approval units, digitising loan application processes, and establishing clear approval timelines. They also urged banks to develop tailored financial products to support Ghana’s struggling manufacturing sector.

Responding to concerns about collateral demands — with some entrepreneurs accusing banks of excessive requirements — Mr. Awuah clarified that collateral coverage of up to 120 percent is mandated by regulation rather than determined at banks’ discretion.

“It’s a requirement of law. If you want a secure facility, then by law the banks must have a collateral coverage of at least 120 percent,” he explained, adding that improved communication is needed to enhance public understanding of banking processes.

“As banks, we need to communicate a lot more,” he stressed.

He further encouraged businesses to explore alternative financing options, including specialised green finance facilities, which may offer more competitive rates than traditional bank loans.