120% Collateral Requirement Shuts Businesses Out of Credit — AGI

Banks in Ghana are demanding collateral worth as much as 120 per cent of the loan amount being sought, effectively locking viable businesses out of credit even as the sector sits on improved liquidity and lending rates fall to multi-year lows, the Association of Ghana Industries (AGI) has warned.

Eric Defor, Chairman of the AGI’s Economic Affairs Committee, said on Joy News’ PM Express on Wednesday, November 11, that access to finance remains the binding constraint on industry despite the central bank’s success in stabilising the macroeconomic environment. He called on the government to address the issue in the 2027 Budget, which Finance Minister Dr Cassiel Ato Forson presents to Parliament on Thursday, November 12.

“The Banks Are Awash With Money”

Defor acknowledged that the Bank of Ghana’s management of key indicators had been commendable, and that the government’s continued repayment of obligations under the Domestic Debt Exchange Programme (DDEP) had strengthened bank balance sheets.

“The banks are awash with money now,” he said. “Access is not very easy. I know that they have money because the government has been able to keep the repayment of the DDEP debts going. So the banks have money, but accessing the funds is not that easy, even though the interest rates have come down.”

The data supports his assessment of improved liquidity and cheaper credit at the headline level. The Bank of Ghana’s policy rate has been held at 14 per cent since September 2026, down from 28 per cent in May 2025 . The average commercial bank lending rate fell from 20.58 per cent in January 2026 to 15.94 per cent in August — a 25-year low . The Ghana Reference Rate, the benchmark used to price loans, dropped to 11.71 per cent in March .

Yet those averages mask the cost that SMEs actually face. Bank of Ghana data for May 2026 shows indicative Annual Percentage Rates (APRs) for one-year SME credit ranging from 11.03 per cent at the lowest to 33.58 per cent at the highest, with several banks pricing well above 25 per cent . The gap between the policy rate and what a small business is actually offered remains wide.

The Collateral Barrier

Defor identified collateral requirements as the decisive obstacle. He cited instances where borrowers were required to pledge security valued at nearly 120 per cent of the loan amount.

“Collateralisation is also another problem which is still in the market. If my memory serves me right, they are now asking for almost about 120 per cent of the amount you want to borrow,” he said.

He acknowledged that banks remained cautious in the aftermath of Ghana’s financial sector crisis, but argued that the conditions were preventing businesses from benefiting from the improved economic environment. He also raised concerns that some institutions may be directing available funds into government securities rather than lending to productive enterprises, and called for reliable data to establish where credit is actually flowing.

The Bank of Ghana’s Collateral Registry data offers a partial window. Cash collateral remained the most frequently registered category in the second quarter of 2026, accounting for 80,673 registrations — 68.7 per cent of all collateral pledged . The dominance of cash collateral suggests that lenders continue to favour the safest possible security, disadvantaging businesses whose assets are held in inventory, equipment or receivables rather than liquid deposits. Total registrations fell 32.2 per cent year-on-year in Q2 2026, driven largely by a decline in activity by savings and loans companies .

A Persistent Concern

The AGI has flagged access to credit repeatedly. Its Q2 2026 Business Barometer recorded a Business Confidence Index of 108.7, down slightly from 109.5 in the first quarter, with access to credit identified as a challenge by 11 per cent of surveyed businesses . The association noted that while lending to the private sector had increased, the expansion had yet to translate into tangible benefits for the real sector, with construction firms particularly affected .

Defor welcomed the government’s restructuring of the VAT regime, which he said had helped reduce production costs. But he argued that lower production costs and lower benchmark rates would deliver limited relief if businesses could not meet the conditions required to obtain credit in the first place.

What the Budget Might Offer

Deputy Finance Minister Thomas Ampem Nyarko has said the 2027 Budget will introduce no new taxes, with the government relying on expenditure rationalisation and spending cuts to finance its flagship programmes . The centrepiece is a “New Economy” programme of roughly US$10 billion over four years from 2027 to 2030, targeting job creation in agriculture, textiles, pharmaceuticals, tourism and manufacturing, financed without new borrowing partly by reducing the primary surplus target from 1.5 per cent to 0.5 per cent of GDP .

Whether that programme includes specific measures to ease collateral constraints or incentivise lending to productive sectors was not clear ahead of the Budget presentation. For AGI members, the test will be whether the improved liquidity in the banking system is matched by credit that actually reaches factory floors, workshops and farms.

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Reporter’s note: The 120 per cent collateral figure is as stated by the AGI’s Eric Defor; it is not an official Bank of Ghana requirement. The Budget was not yet presented at the time of publication. Bank of Ghana APR data reflects indicative rates for May 2026 and individual borrowers may face different terms.