Ghana Association of Bankers says average lending rates could drop to about 10%

Chief Executive of the Ghana Association of Bankers, John Awuah has noted that the average lending rates could drop significantly from 15 to 10 percent. 

According to Mr. Awuah, this will be based on improvement in the current economic fundamentals and will be achieved on the back of calls for interest rates reduction.

However, Mr. Awuah maintained that the banks are “ever” committed to reducing interest rates. 

He said as long as the economic situation and variables improve, rates will drop automatically.

“We have seen rates dropped from over 30% some years ago to average 20%, when the situation [economic fundamentals] did improve,” he stated

“And I can assure you it could go down further. “We are never excited when interest rates are high because it hurts our businesses too. This is why we are all working together, with the relevant regulators to drive down the cost of credit”, Mr. Awuah noted.

Businesses benefiting from interest rates reduction

The Chief Executive of the Ghana Association of Bankers also made a strong case for businesses to respond to these lending rate cuts.

According to Mr. Awuah, this is one of the surest ways that the reduction in interest rates by banks will be felt by all sectors of the economy.

Rising Non-Performing loans and role of the judiciary 

Non-Performing Loans continue to hit levels which many have described as worrying.

The Bank of Ghana put the total industry NPL at the end of June at about ¢8 billion cedis, a development that has been compounded by Covid-19 which has made it difficult for most businesses to honour their loans because of the negative impact of the pandemic on their operations. 

 Mr. Awuah said the Judiciary has not been helpful with respect to checking the high loan default rates in the country. 

“We need to let borrowers understand that when they default, there are consequences and I think that the judiciary is not helping in this area” he added. 

Mr. Awuah noted that “there have been a lot of instances where banks have secured Judgment and later someone pops up that the property belongs to them and the court grants their requests by freezing enforcement” 

“We don’t think that enough has been done to deal and check persons that default on loans”, he further said.

“I will put the current judiciary support at around 30% in terms of assistance” the Chief Executive of the Ghana Association of Bankers noted. 

Complying with recent Bank of Ghana’s directive 

Mr. Awuah noted that as far as he is concerned members of the association have complied with the recent directive of some charges that are deemed to be illegal. 

But on the question of capping charges, Mr. Awuah said apart from regulation that seeks to check illegal fees, commercial banks should be left to allow the forces of demand and supply to guide these charges.