Ghana's Rate Cuts Are Working. Just Not for the Borrowers Who Need Them Most

The Bank of Ghana has cut its benchmark rate by a cumulative 1,450 basis points since its 2023 peak. Commercial bank lending rates have followed. For the traders, farmers and micro-entrepreneurs who need relief most, the transmission has barely begun.

In January 2026, the Bank of Ghana cut its Monetary Policy Rate to 15.5%, its lowest level since early 2022. The cut marked the fourth consecutive reduction in a remarkable easing cycle: from a peak of 30% in September 2023, the MPR has fallen by a cumulative 1,450 basis points in just over two years. Headline inflation fell to 5.4% in December 2025, down from 54.1% at the end of 2022. The cedi has appreciated significantly against the US dollar. On paper, Ghana’s macroeconomic recovery is one of the most dramatic reversals on the African continent.

And yet for the majority of Ghanaians who borrow money (the market traders in Kumasi, the smallholder farmers in the Western Region, the micro-entrepreneurs across the country’s informal sector), the rate cutting cycle has delivered almost nothing. The reason is not a failure of monetary policy. It is a structural feature of how Ghana’s credit market is built: a two-speed transmission system in which policy rate changes reach commercial bank borrowers relatively quickly and reach NBFI and microcredit borrowers slowly, or not at all.

Ghana MPR Easing Cycle: Key Data Points

How Monetary Policy Transmission Actually Works

When a central bank cuts its policy rate, the textbook assumption is that cheaper short-term funding flows through to cheaper lending across the economy. In practice, this transmission is neither immediate nor uniform. It depends on the funding structure of lenders, the competitive dynamics of the credit market, and the risk profile of borrowers being served.

Commercial banks in Ghana access liquidity primarily through the interbank market and customer deposits, both priced with direct reference to short-term market rates that move closely with the MPR. When the Bank of Ghana cuts its benchmark rate, Treasury bill yields fall. Average commercial bank lending rates declined from approximately 30.25% to 20.5% over the course of 2025, a reduction of nearly 10 percentage points driven in large part by the sharp fall in T-bill yields over the same period.

This is a real and meaningful improvement for the segment of the Ghanaian economy that borrows from commercial banks: large corporates, the public sector, salaried professionals with formal employment records, and the upper tier of SMEs with audited accounts and collateral to pledge. For these borrowers, the easing cycle has produced tangible relief.

The rate cuts have reached those who borrow from commercial banks. They have not meaningfully reached those who borrow from microfinance institutions. These are not the same population.

Why NBFIs and Microcredit Institutions Move Differently

Non-bank financial institutions and microcredit operators in Ghana have a fundamentally different cost structure. They do not access the interbank market on the same terms as commercial banks. Many fund their loan portfolios through deposits mobilised at above-market rates to attract savers, through wholesale borrowing from commercial banks at spreads, or through development finance institution facilities with their own repricing timelines. When the MPR falls, their actual cost of funds does not fall at the same speed. In some cases it does not fall at all until their funding facilities come up for renewal.

Beyond funding costs, NBFI and microcredit lending rates carry a risk premium that is structurally disconnected from monetary policy. A commercial bank pricing a mortgage loan to a salaried borrower with verifiable income is carrying credit risk that moves with macroeconomic conditions. A microfinance institution pricing a loan to an informal trader (with no credit history, irregular income, and no collateral) is carrying a risk premium determined by portfolio NPL rates, operational costs of last-mile lending, and the cost of managing high-volume small-ticket loans. That premium does not compress because the BoG cut rates. It compresses only when the underlying structural costs of serving that borrower segment change.

Research on microcredit interest rates across Africa confirms this directly: MFIs consistently maintain lending rates significantly above commercial bank rates because of elevated credit costs and risk premiums that are independent of the benchmark rate. Ghana is not an exception. It is an illustration of a rule.

The Two-Speed Transmission in Practice

A mid-sized Ghanaian commercial bank’s lending rate for a salaried borrower has declined in line with the MPR easing cycle. The bank’s cost of funds (primarily T-bills and interbank borrowing) has fallen sharply. The risk profile of its core borrowers has not materially changed. Rate pass-through has been near-complete.

A microfinance institution serving informal traders in Kumasi has not moved its lending rate at the same pace. Its funding costs (wholesale borrowing from a Tier 1 bank repriced annually, and high-rate retail deposits) have not yet fully reflected the easing cycle. Its portfolio NPL rate remains elevated. Its operational cost per loan, driven by agent networks and manual processing, is unchanged. For its borrowers, the rate cutting cycle has not arrived.

The Inequality Built Into Transmission Lags

The consequence of two-speed transmission is an inequality that inverts the logic of monetary easing. The purpose of cutting rates during a recovery is to stimulate economic activity. The economic actors most in need of stimulation in Ghana are in the informal sector, which accounts for approximately 80% of employed Ghanaians, concentrated in agriculture, trade, and services. These are precisely the borrowers served by NBFIs and microcredit institutions whose rates are not moving.

Meanwhile, corporate borrowers and salaried professionals (who were better positioned to absorb high rates and whose consumption and investment decisions are less credit-constrained) are receiving the full benefit of the easing cycle. Monetary policy, designed as a broad stimulus, is functioning as targeted relief for the formally employed and the already-bankable.

This is not a uniquely Ghanaian problem. The same dynamic characterises credit markets across much of sub-Saharan Africa, where tiered lending systems create structural barriers to monetary transmission in exactly the segment of the economy where transmission is most needed. But Ghana’s current easing cycle (the most aggressive in the region in recent years) provides an unusually clear illustration of the gap.

What Would Close the Transmission Gap

The structural solution is not to require NBFIs to cut rates by regulatory fiat. Rate caps have a poor track record in African microfinance markets, tending to reduce credit availability rather than improve affordability. The more durable interventions address the underlying cost drivers.

Reducing the cost of funds for NBFIs requires either direct access to cheaper liquidity (through BoG-facilitated refinancing facilities or development finance mechanisms) or a reduction in the wholesale borrowing spreads charged by commercial banks to NBFIs. Reducing the risk premium requires improvements in credit information infrastructure that lower the cost of assessing and pricing informal sector borrowers. Ghana’s credit bureau enquiries reached 29.5 million in 2024, a 114.6% increase from 13.7 million in 2023, with credit scoring now approved and operational. This is the infrastructure that, over time, can reduce the information-driven component of the NBFI risk premium.

Reducing operational costs requires loan product design that scales more efficiently. Income-aligned repayment structures collected through mobile money reduce both the cash handling cost and the default rate relative to fixed monthly instalments collected in person. These are not abstract proposals. They are design choices that some lenders in Ghana are already beginning to make.

The MPR is now at 15.5%. Whether that number reaches the traders, farmers and informal workers who constitute the majority of Ghana’s borrowing population depends not on the next MPC decision, but on whether the lending infrastructure beneath it is redesigned to close the transmission gap that monetary policy alone cannot bridge.

Sources

• Bank of Ghana, MPC Press Release, January 2026

• Bank of Ghana, Monetary Policy Report, January 2026

• Citi News: Bank of Ghana cuts policy rate to 15.5%, January 2026

• Ghana Business News: BoG announces lowest policy rate in four years, January 2026

• Ghana Web: Full text, why BoG cut its policy rate to 15.5%, January 2026

• Citi News: Credit enquiries soar 114% in 2024 as digital lending expands, August 2025

• MyJoyOnline: Credit reference bureau enquiries surge in 2024

• GBC Ghana: Credit enquiries increase from 13.7 million to 29.5 million in 2024

• Citi News: Ghana’s credit landscape, digital innovation and financial inclusion, May 2025