With a strong currency and falling inflation, banks have more scope to expand lending, Bank of Ghana Governor, Dr Johnson Asiama has said.

The cedi has appreciated more than 40 percent against the US dollar so far this year, supported by improved reserves which reached US$11.1billion by end-June – equal to 4.8 months of import cover.

Inflation dropped to 12.1 percent in August, the lowest in nearly four years, from 13.7 percent in June.

“These developments create a more favourable risk environment for banks to expand credit prudently,” Dr Asiama told banking executives at a post-Monetary Policy Committee meeting in Accra on Wednesday.

He noted that inflation expectations are anchored across households and businesses, boosting confidence and supporting investment decisions.

The central bank cut its policy rate by 300 basis points to 25 percent in July, signalling a shift from a defensive stance to one that cautiously supports growth.

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Dr Asiama said there is scope for further easing if economic conditions continues to improve.

The economy expanded 5.3 percent in first-quarter 2025 with non-oil GDP up 6.8 percent, driven by agriculture and services.

The Composite Index of Economic Activity grew 4.4 percent in May, pointing to resilience in consumption, trade, construction and tourism.

The fiscal deficit stood at 0.7 percent of GDP in the first half, below the 1.8 percent target, while public debt levels declined.

The banking sector remains “well-capitalised, liquid and profitable”, with non-performing loan ratios falling due to improved macroeconomic conditions and better credit underwriting, according to the Governor.

Recent recapitalisation efforts have strengthened balance sheets, positioning banks to take on new growth opportunities.

However, Dr. Asiama urged banks to align lending strategies with productive sectors of the economy, particularly small- and medium-sized enterprises, while maintaining sound risk management.

“The challenge is to grow lending while preserving the hard-earned stability that now defines our financial system,” he said.

The Bank of Ghana plans to roll out new regulatory measures to reinforce sector resilience and align with international standards. These include a Credit Risk Management Directive, a Bancassurance Directive and large exposure limits to reduce concentration risk.

Liquidity rules will require banks to hold enough high-quality liquid assets to withstand 30-day stress scenarios.

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The regulator is also tightening enforcement of foreign exchange rules, including mandatory weekly inward remittance reports and a ban on unapproved FX practices. Failure to comply will attract sanctions under banking and payment systems laws.

A strategic business model review of banks will assess the sustainability of their operations, with full board and senior management involvement.

Dr Asiama called on banks to translate the current macroeconomic stability into inclusive growth, by financing critical infrastructure, supporting SMEs and leveraging digital solutions to expand financial access.

“The MPC decisions give us an opening to shift from defence to growth, from consolidation to expansion,” he said.

Borrowing Cost

Lending rates in Ghana remained elevated in June with sharp disparities across borrower categories and loan maturities, according to the latest Annualised Percentage Rate (APR) data from the Bank of Ghana.

The figures, which reflect the true cost of borrowing after accounting for fees and charges, show households continued to enjoy the broadest access to credit while small and medium-sized enterprises (SMEs) faced the steepest financing costs.

While the Ghana Reference Rate (GRR) stood at 23.80 percent for most loan categories, average APRs – which include bank-specific risk premiums and fees – ranged from about 17 percent to over 45 percent depending on the borrower type and loan tenor.

Short-term household loans were generally cheaper than longer-term facilities, but additional charges such as processing, insurance and facility fees pushed up effective borrowing costs.

Households had access to more competitive rates, with banks such as Bank of Africa and Republic Bank offering APRs around 20 percent for certain tenors while others charged above 40 percent.

In contrast, small- and medium-sized enterprises (SMEs) faced a high floor for borrowing – with even the most competitive one-year SME loans priced above 17 percent and medium-term rates often exceeding 30 percent.

Corporates with strong credit profiles secured the lowest rates, some near the GRR – particularly for short-term borrowing, while riskier sectors, including agriculture, faced substantially higher costs.