Lower lending rates reach universal banks faster than community banks

The Chartered Institute of Bankers Ghana (CIB Ghana) revealed that interest rate reductions are being felt more swiftly by borrowers of universal banks as opposed to those of community and microfinance institutions. This revelation was unveiled during CIB Ghana's third Post-Monetary Policy Committee (Post-MPC) Policy Seminar, which explored monetary policy transmission, credit growth, and non-performing loans (NPLs).

The seminar included the Bank of Ghana (BoG), the Ministry of Finance, banking industry representatives, traders, and academics. The event followed the Central Bank of Ghana's Monetary Policy Committee's unanimous decision on September 24, 2026, to keep the policy rate at 14 percent.

Dr. Ellen Ohene-Afoakwa, the President of CIB Ghana's Governing Council, explained that monetary policy influences financial markets, lending conditions, businesses, and households. The effectiveness of monetary policy, however, hinges on the extent to which the policy rate's changes are transmitted to the broader economy. She emphasized that banks should extend sufficient credit to productive sectors while maintaining robust risk management and responsible lending practices.

Addressing non-performing loans (NPLs), Dr. Ohene-Afoakwa advocated for a stronger emphasis on preventing bad loans instead of recuperating them after they have deteriorated. She also highlighted CIB Ghana's professional education and certification programs, which encompass non-interest banking, digital, and environmental, social, and governance (ESG) credentials, as well as plans for a modern bankers' house and business complex.

She announced that Ghana had been granted the privilege of hosting the World Conference of Banking Institutes in 2028.

Dr. Simon Harvey, Director of Research at the BoG, discussed how changes in the policy rate do not immediately result in lower borrowing costs. Banks consider factors like funding costs, credit risks, operating expenses, and expected losses when pricing loans. Harvey emphasized that this transmission process is neither automatic nor instantaneous. The Monetary Policy Committee aims to maintain control over inflation expectations, ensure currency stability, and safeguard the soundness of financial institutions.

Robert Dzato, Chief Executive Officer of CIB Ghana, presented insights from the Institute's September Pre-MPC sentiment survey, conducted among banks prior to MPC meetings to provide industry perspectives to support the Committee's work. The survey indicated that most universal banks surveyed were offering lending rates between 10 and 15 percent, while 46 percent of community banks were charging between 21 and 25 percent, up from 36 percent in July.

Microfinance banks reported rates of about 31 to 40 percent. The survey also found that 65 percent of respondents had high confidence in the macroeconomic environment, while 80 percent believed the current policy stance was effective in controlling inflation. Additionally, 86 percent of respondents expected the MPC to maintain the policy rate, and 70 percent anticipated a rise in inflation over the next three months.