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Ghana Bankers Association estimates average lending rates could reduce to 10%

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John Awuah, Chief Executive of the Ghana Association of Bankers

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• The average lending rates could reduce from 15 to 10%

• This is according to the Chief Executive of the Ghana Bankers Association

The reduction however is based on current economic fundamentals and indicators improving

The Ghana Bankers Association has estimated that the average lending rates of banks could reduce significantly from 15 to 10 percent.

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According to Chief Executive of the association, John Awuah, the drop will be based on current economic fundamentals and indicators improving.

In an interaction with Joy News, Awuah also debunked the notion that banks were not committed to reducing interest rates as there is currently a gap disparity between the lending and policy rates.

“We have seen rates dropped from over 30% some years ago to average 20%, when the situation [economic fundamentals] did improve and I can assure you it could go down further and 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,” he explained.

Meanwhile, the Institute of Economic Affairs has urged the Bank of Ghana to impose a ceiling of five percentage points on the spread of banks to lower lending rates in the country.

According to Director of Research at the institute, Dr John Kwakye, the move could ‘force the hand’ of banks to follow the central bank’s monetary policy rate more closely and keep the lending rate within bounds.

But John Awuah believes the call is counterproductive as the lending rates is often determined by market fundamentals.

“Any suggestions or any discussions of capping interest rates should be of a concern because it has a probability or propensity to be counterproductive and can really result in unintended consequences”.

“You can sight the example that we have seen in Africa where Kenya after three unsuccessful attempts at introducing interest rates cap, it finally introduced caps on interest rates in 2016, only to make a U-turn in 2019 going back to free-market-determining lending rates. You can’t run away from market fundamentals,” he explained.

He added that “as a country, we should all rally behind policymakers in their efforts towards a move to lower market interest regime. And banks will not have anything to do than to follow suit as we have done.”

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