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Interest on business loans hitting 50%, with no bank offering rates below 30%.

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The cost of credit for companies in Ghana remains high, with all banks in the country unable to offer corporate loans at rates below 30%.

Firms seeking loans are facing rates as steep as 50%.

This situation is exacerbated by the dual threat of high non-performing loans impacting bank solvency.

According to the latest Bank of Ghana report (March 2024) on annualized percentage rates for corporate loans, no bank is lending to companies at rates below 30%.

Regardless of the loan duration—whether one, three, or five years—companies must pay between 30% and 47% in interest, compared to the industry average of 30.45%.

One-year tenor

For example, for a one-year corporate loan, the best rate a company could get was from Standard Chartered Bank which offered the credit facility at 32.71%.

It was followed by OmniBSIC Bank Ghana Limited (33.06%). Coming in closely was CalBank PLC (33.07%), GCB Bank Limited (34.00%) and Ecobank Ghana Limited (34.45%).

The highest rate under this tenor was held by Agricultural Development Bank Ghana Limited at 42.94%. First National Bank (Ghana) Limited and Universal Merchant Bank Limited followed with a rate of 40.47% and 40.03% respectively.

Three-year tenor

When it came to a loans that spans for three years, the first four banks with the least rate were United Bank for Africa (Ghana) Limited (32.46%), Standard Chartered Bank (Ghana) Limited (32.71%), OmniBSIC Bank Ghana Limited (33.06%) and FBNBank (Ghana) Limited (33.20%).

Again, Agricultural Development Bank Ghana Limited’s rate was the highest – 42.81%.

Rates by some other banks:  Stanbic Bank Ghana Limited (39.23%), Prudential Bank Limited (37.29%), Societe General Ghana (35.45%) and Access Bank Ghana Plc (35.38%).

Five-year tenor

If the loan was to be extended to a five-year period, it was only Access Bank Ghana Plc’s rate which was just 0.23 points different below the industry’s average. Its rate was 30.22%. Further break down is as follows.

Société General Ghana PLC – 31.00%

GCB Bank Limited – 32.20%

Standard Chartered Bank – 32.71%

Prudential Bank Ghana Limited – 36.36%

Zenith Bank (Ghana) Limited – 37.29%

Fidelity Bank Ghana – 37.32%

The Agricultural Development Bank Ghana Limited maintained its position as the financial institution with the highest lending rate in this category again with 47.24%.

While most of the bank’s hovered around these rates, some of them did not provide any loans at all under any of the tenors in the period under review.

This high cost of borrowing is significantly impacting the ability of companies to invest, expand, and even manage cash flow.

Factors driving this include the overall economic climate and the rates of monetary policy and inflation.

The mix of these factors has further crippled the ability of companies to make sound repayments, leading to high non-performing loans by banks.

As of February 2024, NPLs stood at an alarming 25%, meaning a quarter of loans granted by banks are likely not to be recovered in full.

Although the financials of banks are showing a strong recovery from the Domestic Debt Exchange Programme (DDEP)-induced losses, their profitability remains at risk due to bad loans, which could have a greater impact on the stability of the overall financial sector.

What options are therefore worth considering?

Companies may have to explore alternative funding sources, such as bonds, equity, or seek loans from non-bank financial institutions.

Banks, on the other hand, must improve the risk assessments of corporate borrowers by strengthening their credit underwriting systems.

Meanwhile, Banking Consultant, Dr. Richmond Atuahene blames the development partly on government’s failure to settle debts owed contractors

The Annualized Percentage Rate includes the interest rate plus additional fees charged with the loan and it is an important measure for borrowing from financial institutions.

It helps borrowers understand the total cost of borrowing money from a bank.

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