SMEs Continue to Face High Borrowing Costs Despite Falling Interest Rates – Bank of Ghana Report

By 24HourBusiness.org Business Desk

Accra, Ghana – Small and Medium-sized Enterprises (SMEs), widely regarded as the backbone of Ghana's economy, continue to face significantly higher borrowing costs than large corporations, according to the Bank of Ghana's Annualised Percentage Rate (APR) Report for May 2026.

 

The latest data reveals that while competition among banks has improved lending options for some borrowers, financing remains prohibitively expensive for many SMEs, with interest rates ranging from 11.03% to as high as 33.58% depending on the lender and loan tenure.

Economists warn that these persistently high borrowing costs could undermine entrepreneurship, slow business expansion, limit job creation and weaken Ghana's broader private-sector-led growth agenda.

 

SMEs Remain the Backbone of Ghana's Economy

The financing challenge is particularly significant because SMEs dominate Ghana's business landscape.

According to the Ghana Statistical Service (Integrated Business Establishment Survey - IBES):

• Ghana has more than 1.8 million business establishments. 
• More than 90% are classified as Micro, Small and Medium-sized Enterprises (MSMEs). 
• SMEs contribute an estimated 70% of Ghana's Gross Domestic Product (GDP). 
• The sector accounts for approximately 80–85% of employment in the private sector. 
• Thousands of young entrepreneurs depend on SME financing to establish and grow businesses across agriculture, manufacturing, retail, logistics, ICT, hospitality and professional services. 

Despite their economic importance, access to affordable finance remains one of the sector's greatest challenges.

 

 

One-Year SME Loans Reach 33.58%

According to the Bank of Ghana's May 2026 APR Report, borrowing costs vary widely among commercial banks.

One-Year SME Loans

Bank	Annualised Percentage Rate (APR)
Standard Chartered Bank Ghana	11.03%
Absa Bank Ghana	Competitive rates among leading lenders
Stanbic Bank Ghana	Competitive pricing
Guaranty Trust Bank Ghana	33.58% (Highest)

The difference between the lowest and highest rates exceeds 22 percentage points, illustrating the significant disparities in lending conditions across the banking industry.

For many SMEs, this difference can translate into millions of cedis in additional financing costs over the life of a loan.

 

Three-Year SME Financing

For medium-term financing, the cost of borrowing remains elevated.

Bank	APR
Stanbic Bank Ghana	13.34% (Lowest)
Universal Merchant Bank (UMB)	31.09% (Highest)

The data suggests that businesses requiring longer repayment periods continue to face substantial financing costs unless they meet the strongest credit criteria.

 

Five-Year SME Loans

Long-term borrowing also showed wide variations.

Bank	APR
Ecobank Ghana	13.97% (Lowest)
Agricultural Development Bank (ADB)	25.07% (Highest)

Although long-term facilities generally allow businesses to spread repayments over several years, higher interest charges can significantly increase the overall cost of investment.

 

Large Corporations Borrow at Much Lower Rates

The Bank of Ghana report highlights a sharp contrast between financing available to SMEs and that offered to established corporate borrowers.

Corporate clients continue to benefit from substantially lower interest rates because banks perceive them as presenting lower credit risk.

For example:

• One-year corporate loans were available from 7.62% at Absa Bank Ghana. 
• Three-year corporate facilities started from 9.78%. 

This means that, in some cases, SMEs are paying two to four times more than large companies for comparable financing.

 

Why SMEs Pay More

Commercial banks price loans based on risk.

Several factors contribute to higher borrowing costs for SMEs, including:

• Limited collateral 
• Short business operating history 
• Weak financial statements 
• Higher default risk 
• Poor credit records 
• Informal business structures 
• Limited cash flow visibility 

Banks also consider sector-specific risks, macroeconomic conditions and the cost of raising funds before determining lending rates.

 

Understanding the Annualised Percentage Rate (APR)

The Annualised Percentage Rate (APR) provides borrowers with a clearer picture of the true cost of a loan.

Unlike the advertised interest rate alone, the APR includes:

• Base lending rate 
• Risk premium 
• Processing fees 
• Administrative charges 
• Other applicable lending costs 

The Bank of Ghana introduced APR disclosures to improve transparency and enable borrowers to compare loan products across financial institutions.

 

For May 2026, the central bank reported:

• Average banking sector APR: 17.64% 
• Ghana Reference Rate:10.03% 

The Reference Rate serves as the benchmark upon which banks add their own risk premiums and pricing margins.

 

High Interest Rates Continue to Constrain Growth

Business associations have repeatedly identified access to affordable finance as one of the biggest obstacles facing SMEs.

High borrowing costs can limit a business's ability to:

• Purchase equipment 
• Expand operations 
• Hire additional employees 
• Invest in technology 
• Increase production 
• Enter export markets 

For start-ups and young businesses, expensive credit often discourages investment altogether, forcing entrepreneurs to rely on personal savings or informal lenders.

 

Implications for the 24-Hour Economy

Affordable financing is expected to play a critical role in the successful implementation of Ghana's 24-Hour Economy policy, which aims to stimulate continuous production, industrialisation and employment.

Many of the businesses expected to drive the initiative—including manufacturers, agro-processors, transport operators, logistics companies and service providers—are SMEs.

Economic analysts argue that unless financing becomes more accessible, many smaller firms may struggle to invest in:

• Additional production shifts 
• Modern machinery 
• Digital technologies 
• Warehouse expansion 
• Cold-chain logistics 
• Workforce development 

Lower financing costs could therefore become a key enabler of Ghana's industrial transformation and export competitiveness.

 

What Can SMEs Do?

Financial experts advise SMEs seeking bank financing to strengthen their credit profiles by:

• Maintaining audited financial statements. 
• Keeping accurate accounting records. 
• Registering with the Registrar of Companies and the Ghana Revenue Authority. 
• Building a positive credit history. 
• Improving corporate governance. 
• Developing bankable business plans. 
• Comparing loan offers across multiple financial institutions before borrowing. 

With the spread between the highest and lowest SME lending rates exceeding 20 percentage points, shopping around for financing could significantly reduce borrowing costs.

 

Outlook

The latest Bank of Ghana APR report underscores both progress and persistent challenges in Ghana's credit market. While some banks are offering increasingly competitive rates, many SMEs continue to face borrowing costs that can constrain growth and investment.

As policymakers seek to accelerate industrialisation, support entrepreneurship and implement the Economic agenda, improving access to affordable finance for SMEs will remain central to sustaining economic expansion, boosting productivity and creating jobs.

Industry observers say continued macroeconomic stability, lower inflation, declining policy rates and stronger competition within the banking sector could gradually reduce lending costs. However, meaningful improvements will also depend on better credit information, stronger collateral frameworks and targeted financing programmes that reduce the risk of lending to small businesses.

 

Sources: Bank of Ghana Annualised Percentage Rate (APR) Report – May 2026; Ghana Statistical Service (Integrated Business Establishment Survey); Ministry of Finance; Association of Ghana Industries (AGI).