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Ghana’s Struggle with High Loan APRs: A Barrier to Economic Growth

Wpid Economy
Increasing Inflation Makes Borrowing Becomes More Costly

In February 2024, Ghana grappled with soaring annualized percentage rates (APRs) for bank loans, casting a shadow over its economic prospects. The latest report unveiled a harsh reality: industries, households, and Small and Medium Enterprises (SMEs) faced formidable borrowing costs, hindering growth.

Industries Under Pressure: With APRs for industries stubbornly above 30%, businesses felt the squeeze. One-year, three-year, and five-year tenor loans painted a bleak picture, with rates ranging from 30.58% to a staggering 47.51%. These towering figures underscored the financial hurdles obstructing industrial progress.

Households Strained: Ghanaian households bore the brunt of exorbitant borrowing costs, with APRs ranging from 27.71% to a staggering 50.92% for one-year tenor loans. The burden remained significant across different tenors, showcasing the uphill battle for families seeking financial stability.

SMEs in Peril: Even Small and Medium Enterprises (SMEs), vital engines of growth, faced a daunting landscape. APRs fluctuated widely, from 17.03% to an alarming 55.27% across different loan categories. Such disparities threatened the very foundation of Ghana’s entrepreneurial ecosystem.

A Troubling Trend: Adding to the woes was the distressing non-performing loans (NPL) rate of 25%, signaling underlying risks to the banking sector’s stability. Urgent interventions were imperative to mitigate these challenges and foster an environment conducive to economic prosperity.

Call for Action: While the APR provided a standardized measure for loan comparison, its efficacy was marred by excluded fees, raising concerns about transparency. Strategic measures were needed to address this issue, ensuring fair lending practices and safeguarding consumer interests.

Conclusion: Ghana stood at a crossroads, grappling with high loan APRs that threatened to impede its economic trajectory. Addressing this pressing issue demanded concerted efforts from policymakers, regulators, and financial institutions to pave the way for sustainable growth and development.

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