When the Bank of Ghana (BoG) talks about reforming the Ghana Reference Rate (GRR) or targeting lending rates closer to, or lower than, 10%, many people assume the GRR is simply the same thing as the Bank of Ghana’s policy rate.
It is not.
The GRR sits at the centre of one of the most important reforms in Ghana’s financial system over the past decade. To understand why it matters, you first have to understand the problem Ghana was trying to solve before 2018.
Before the GRR, how lending rates worked in Ghana.
Before April 2018, commercial banks in Ghana used what were called “base rates” or “prime rates” to price loans.
Every bank developed its own formula internally.
That meant one bank could use inflation heavily. Another could emphasise its operating costs. Another could factor in shareholder return expectations. And another could include large risk cushions.
The result was enormous inconsistency across the banking sector.
Two borrowers with similar profiles could walk into two different banks and receive dramatically different interest rates.
According to industry discussions at the time, some banks quoted base rates around 17%, while others quoted 25–26% under similar economic conditions.
This created several major problems:
1. Lack of transparency.
Borrowers often did not know why rates were high, why rates differed between banks, or how banks calculated their loan prices.
Banks essentially became “black boxes” when it came to lending.
2. Monetary policy was not working efficiently.
The Bank of Ghana could reduce its policy rate, but commercial banks might refuse to reduce lending rates accordingly.
This weakened what economists call monetary policy transmission, the process through which central bank decisions affect the real economy.
It means, in practice, BoG would lower rates to stimulate businesses, but banks might keep lending rates elevated, meaning businesses and households never actually feel the relief.
This became a major concern for policymakers.
3. High lending costs hurt businesses.
For years, Ghana has struggled with some of the highest commercial lending rates in Africa.
SMEs (small and medium enterprises) were especially affected because banks considered them risky.
High borrowing costs discouraged expansion, hiring, industrial investment, and long-term planning.
Many businesses survived using short-term expensive credit instead of productive long-term financing.
Bank of Ghana’s earlier attempt before GRR.
Interestingly, the GRR was not the first attempt to fix the problem.
In 2012, Bank of Ghana introduced guidelines for computing base rates.
These guidelines were revised again in 2013.
The goal was to standardise how banks priced loans.
But the reforms failed to fully solve the problem because banks still had too much flexibility, methodologies remained inconsistent, and customers still struggled to compare rates fairly.
By 2017–2018, BoG concluded that the entire system needed a redesign.
The Birth of the Ghana Reference Rate (GRR).
In 2018, the Bank of Ghana, working together with the Ghana Association of Banks (GAB), introduced the Ghana Reference Rate (GRR).
The first official GRR was announced in April 2018 at 16.82%.
The reform fundamentally changed how lending rates were supposed to work.
Instead of every bank inventing its own benchmark, there would now be a single common benchmark rate for the entire industry, published monthly and visible to everyone.
Banks would then add a risk premium depending on the borrower.
The formula became: Loan Rate = GRR + Risk Premium
This was a major structural shift in Ghana’s banking system.
So what exactly is the GRR?
The GRR is a benchmark lending rate.
It is the common foundation commercial banks use when pricing loans.
It is not the actual final lending rate.
Rather, it acts as the starting point.
If the GRR is 20% and a bank may add a 3% risk premium, plus other costs, then the customer may borrow at 23% or more.
Is the GRR the same as the Policy Rate?
No.
This is one of the biggest misconceptions.
1. The Monetary Policy Rate (MPR)
The policy rate (or Monetary Policy Rate, MPR) is the rate set by the Bank of Ghana’s Monetary Policy Committee.
It is the central bank’s main signalling tool for controlling inflation, money supply, and economic activity.
When inflation rises sharply, BoG may increase the policy rate to make borrowing more expensive.
When economic growth slows, BoG may reduce it to encourage lending and spending.
The MPR is essentially the “signal” rate of the economy.
2. The Ghana Reference Rate (GRR)
The GRR, on the other hand, is a lending benchmark for commercial banks.
It incorporates several market indicators and is intended to guide loan pricing.
The GRR is influenced by Treasury bill rates, inflation, interbank lending rates, and the BoG policy rate itself.
So the policy rate influences the GRR, but the GRR is not the policy rate.
Think of it this way:
| Rate | Purpose |
| Policy Rate (MPR) | Central bank signal for monetary policy |
| GRR | Benchmark commercial banks use to price loans |
Why was the GRR significant?
The GRR was significant for reasons beyond just banking.
It represented an attempt to modernise Ghana’s financial architecture.
1. It improved transparency.
For the first time, customers could see a common benchmark, compare spreads between banks, and better understand how loans were priced.
This reduced some of the opacity that had characterised lending markets.
2. It increased accountability.
Under the new framework, banks had to justify the extra margin they added above the GRR.
That was important because it exposed risk pricing, inefficiencies, and potentially excessive spreads.
In theory, competition should have pressured banks to lower margins.
3. It strengthened monetary policy transmission
One of BoG’s biggest frustrations had been that policy-rate cuts were not reaching ordinary borrowers.
The GRR was designed to improve the “transmission mechanism.”
If market indicators fell, the GRR should fall, and lending rates should eventually follow.
At least, that was the theory.
GRR was also about Trust.
One overlooked dimension of the GRR reform is that it was partly about rebuilding trust after Ghana’s banking sector crisis.
Between 2017 and 2019, Ghana experienced a major banking cleanup. Several banks collapsed, licenses were revoked, and confidence in the financial sector weakened.
Introducing a transparent industry benchmark helped signal stronger regulation, more discipline, and a more rules-based financial system.
So the GRR is not just technical monetary policy. It was also an institutional reform.
Why did lending rates stay high anyway?
Many people assumed the GRR would automatically make loans cheap.
It did not.
Why?
Because the benchmark was only one part of the equation.
Banks still added large risk premiums because Ghana’s economy continued to face inflation volatility, currency depreciation, government borrowing pressures, and high default risks.
In other words, even with a standardised benchmark, the underlying economic risks remained high.
This is why Ghana continued to experience commercial lending rates above 30% in many cases, especially for SMEs.
The hidden role of Government borrowing.
One under-discussed factor affecting the GRR is government borrowing.
Banks often prefer lending to the government through Treasury bills because it is safer, easier, and highly profitable.
If Treasury bill rates are high, banks demand higher returns elsewhere as well, including on private-sector loans.
Since Treasury bill yields feed into the GRR formula, government borrowing indirectly pushes up commercial borrowing costs.
This creates what economists call the “crowding out effect.”
Government borrowing can crowd out private businesses’ access to affordable credit.
This is one reason many analysts say that reducing lending rates in Ghana requires fiscal discipline, not just central bank reforms.
Did the GRR achieve its goals?
The answer is mixed.
1. Successes
The GRR succeeded in standardising benchmark pricing, improving transparency, and making lending-rate discussions more structured.
It also improved public understanding of how loan pricing works.
2. Limitations
But it did not fully address high lending costs, limited access to credit, or expensive SME financing.
That is why the Bank of Ghana announced fresh reforms in 2025 aimed at pushing lending rates closer to single digits over time.
Why the current “10%” discussion matters.
The recent BoG discussion around “10%” is historically significant because Ghana has spent decades operating with high lending costs.
A move toward lower inflation, lower Treasury bill rates, and lower GRR levels
could fundamentally reshape business financing, mortgages, industrial growth, and entrepreneurship.
Lower lending rates would especially matter for manufacturers, startups, agriculture, and SMEs.
But achieving sustainable 10% lending rates requires more than just changing the GRR formula.
It also depends on inflation stability, exchange-rate stability, lower fiscal deficits, reduced government borrowing, and stronger credit-risk systems.
Final Thought
The Ghana Reference Rate was never just a technical banking reform.
It was an attempt to answer a deeper economic question: How do you create a fair, transparent, and efficient credit system in an economy where borrowing has historically been expensive and unpredictable?
The GRR standardised loan pricing and improved transparency, but it also revealed a harder truth: High lending rates in Ghana are not caused by one number alone. They are the product of inflation, fiscal policy, banking-sector risk, currency instability, and the broader structure of the economy itself.
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The author, Dr. Maxwell Ampong, serves as the CEO of Maxwell Investments Group. He is also an Honorary Curator at the Ghana National Museum and the Official Business Advisor with Ghana’s largest agricultural trade union under Ghana’s Trade Union Congress (TUC). Founder of WellMax Inclusive Insurance and WellMax Micro-Credit Enterprise, Dr. Ampong writes on relevant economic topics and provides general perspective pieces. ‘Entrepreneur In You’ operates under the auspices of the Africa School of Entrepreneurship, an initiative of Maxwell Investments Group.
Disclaimer: The views, thoughts, and opinions expressed in this article are solely those of the author, Dr. Maxwell Ampong, and do not necessarily reflect the official policy, position, or beliefs of Maxwell Investments Group or any of its affiliates. Any references to policy or regulation reflect the author’s interpretation and are not intended to represent the formal stance of Maxwell Investments Group. This content is provided for informational purposes only and does not constitute legal, financial, or investment advice. Readers should seek independent advice before making any decisions based on this material. Maxwell Investments Group assumes no responsibility or liability for any errors or omissions in the content or for any actions taken based on the information provided.