Lower Interest Rates Seen Reducing Loan Defaults

By Praisebell Rosemond Larbi

Ghana’s banking industry is increasingly optimistic that the sustained decline in interest rates will lead to fewer loan defaults, improved asset quality, and stronger balance sheets, as borrowing costs ease pressure on businesses and households.

Industry players say the shift towards a lower interest rate environment is already improving repayment capacity and restoring confidence among borrowers, particularly small and medium-sized enterprises (SMEs) that were severely constrained during years of tight monetary policy.

Managing Director of FirstBank Ghana, Mr Victor Yaw Asante, says contrary to popular perception, banks are more comfortable operating in a low-interest-rate environment because it enhances customers’ ability to service loans and supports business sustainability.

“When rates go down, defaults go down. Businesses become more viable and repayment capacity improves. That’s good for everyone, borrowers and banks alike,” he said.

Mr Asante was speaking at the FirstBank Ghana 2026 Health Walk held at the bank’s head office in Accra, which brought together staff, customers, and key stakeholders as part of activities marking the bank’s 30th anniversary in Ghana.

His comments come at a time when the Bank of Ghana (BoG) has embarked on a sustained monetary easing cycle, reversing years of restrictive policy that followed inflationary pressures and macroeconomic instability. The Monetary Policy Rate (MPR), which stood at about 27.7 percent in late 2024, had declined sharply to 18.0 percent by November 2025, with market analysts projecting a further drop to around 15.0 percent by mid-2026, subject to inflation and exchange rate dynamics.

For banks, the easing cycle signals relief after a prolonged period of high lending rates that strained borrowers and pushed non-performing loans higher, particularly among SMEs and heavily leveraged firms.

Mr Asante said the improving interest rate environment was already beginning to unlock credit for SMEs, which remain the backbone of Ghana’s economy but have historically struggled with access to affordable financing.

He expressed optimism ahead of the next Monetary Policy Committee (MPC) meeting, suggesting that another policy rate cut could be forthcoming if current macroeconomic trends are sustained.

“I suspect there will be a further drop. The central bank has done a very good job, and we expect this to filter through to lower overnight rates and prime lending rates, delivering real gains to consumers and businesses,” he said.

Beyond interest rates, Mr Asante noted that FirstBank Ghana continues to adapt its products and services to prevailing economic conditions, positioning itself as a long-term partner to businesses navigating a changing financial landscape.

He said the bank’s longstanding “You First” philosophy remains central to its strategy, reflecting its three decades of operations in Ghana’s competitive banking sector.

Looking ahead, Mr Asante said the next phase of FirstBank Ghana’s growth will be driven by digital transformation and innovation, as customer expectations increasingly shift towards speed, convenience, and seamless banking experiences.

“The next 30 years will be about customer-centric banking, supported by digital platforms that help people manage both their personal and business lives more efficiently,” he said.

Addressing speculation about a potential listing on the Ghana Stock Exchange (GSE), Mr Asante clarified that while FirstBank is already listed through its parent company on the Nigerian Exchange, a local listing remains under consideration.

He said such a move could be explored within the next two to three years, as the bank evaluates options to deepen its capital base and broaden local investor participation.

As interest rates continue to trend downward, banks such as FirstBank are betting that a more accommodative monetary environment will not only reduce loan defaults but also stimulate credit expansion, support private sector growth, and strengthen overall financial sector stability.