BoG accuses commercial banks for hindering access to loans

The Bank of Ghana (BoG) has accused commercial banks for making it difficult to acquire loans despite the regulator’s effort to make it affordable.

The Head of Research at the Bank of Ghana, Philip Abradu Otoo, expressed worry that although the central bank has pegged the prime lending rate at about 13.5%, several commercial banks are lending above 26%.

What are the banks padding on top of the 13.5%…. that is what we need to focus on”, he said at the opening session of the 9^th Ghana Economic Forum organised by the B&FT.

The central bank in a free market economy has no power to set interest rates. When the BoG cuts the policy rate, it is also trying to morally persuade commercial banks to reduce their lending rates to customers.

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The policy rate determines the rate at which commercial banks determine interest rates on loans.

The Bank of Ghana, in June 2020, reduced its benchmark policy rate by 150 basis points as its first response to the strain that the Coronavirus disease (COVID-19) had imposed on the economy.

The reduction in the rate was the first since November 2018 and the expectation was to make the cost of credit cheaper.

With this cut, it is expected that interest rates on commercial loans would also drop.

But commercial banks are lending at more than 22% with GCB charging the lowest base rate in the country at 22.75%.

Source: The Ghana Report