High lending rates threaten private sector growth

As the Ministry of Finance prepares to receive stakeholder submissions ahead of the 2026 Budget Statement, one message rings loud and clear from the business community: lower lending rates are not just desirable, they are essential. From traders to manufacturers, the call is unified and urgent.

The Ghana Union of Traders Association (GUTA) and the Association of Ghana Industries (AGI) have both made it clear that the current cost of credit is stifling growth, especially for small and medium-scale enterprises (SMEs).

This is not a new concern. For years, businesses have grappled with high commercial interest rates that remain disconnected from macroeconomic indicators. Inflation is falling. The Bank of Ghana’s policy rate has been adjusted downward.

Yet, lending rates offered by commercial banks continue to hover at levels that make borrowing a risky and often unviable option for many enterprises.

The implications are far-reaching. High lending rates mean fewer businesses can afford to expand, invest in new technologies, or hire more workers. SMEs, which form the backbone of Ghana’s economy, are particularly vulnerable.

When access to affordable credit is limited, innovation stalls, productivity dips, and the broader economy suffers. In this context, the business community’s call is not just about profitability. It is about survival and sustainability.

Moreover, the government’s flagship 24-hour economy initiative, which aims to boost productivity and employment through round-the-clock business operations, cannot thrive in an environment where financing is prohibitively expensive.

If businesses are to operate longer hours, they will need capital to invest in infrastructure, staffing, and logistics. Without affordable credit, the policy risks becoming a well-intentioned idea with limited real-world impact.

However, the call for lower lending rates must be weighed against the realities of the financial sector. Banks operate within a framework of risk and return. Lending to businesses, especially SMEs, carries inherent risks.

The cost of funds, non-performing loans, and regulatory requirements all influence the rates banks charge. Therefore, any effort to reduce lending rates must be accompanied by broader reforms that address these underlying issues.

One possible solution is for the government to work with the Bank of Ghana and financial institutions to establish clear margins between the policy rate and commercial lending rates. This could help ensure that monetary policy decisions translate more effectively into real economic benefits.

Additionally, targeted credit schemes, loan guarantees, and tax incentives could help de-risk lending to SMEs and encourage banks to offer more competitive rates.

In the end, the business community’s plea is both reasonable and timely. If Ghana is to unlock its full economic potential, especially in the private sector, access to affordable credit must be prioritised.

The 2026 budget presents a critical opportunity to address this issue head-on. It is time for policymakers to listen, act, and ensure that the cost of finance no longer stands in the way of growth.