The cost of credit for companies in Ghana remains high, as all banks are unable to offer corporate loans below 30%. Firms seeking loans are facing rates as high as approximately 50%, posing a threat to both their solvency and the stability of banks due to high non-performing loans.
According to the latest Bank of Ghana report (March 2024), no bank is lending to companies at rates less than 30%. For instance, for a one-year corporate loan, rates range from 32.71% offered by Standard Chartered Bank to 42.94% by Agricultural Development Bank Ghana Limited.
For loans extending to three and five years, rates also remain elevated, with Agricultural Development Bank Ghana Limited consistently offering the highest rates.
This high cost of borrowing is hindering companies’ ability to invest, expand, and manage cash flow, while contributing to the high non-performing loans in the banking sector, currently at 25%.
To address this challenge, companies may need to explore alternative funding sources such as bonds or equity, while banks should enhance their credit underwriting systems to better assess corporate borrowers’ risks.
Banking Consultant, Dr. Richmond Atuahene, attributes part of this situation to the government’s failure to settle debts owed to contractors.
Understanding the Annualized Percentage Rate (APR), which includes both the interest rate and additional fees, is crucial for borrowers to comprehend the total cost of borrowing from financial institutions.
