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You Are Here: Home » Editorials/Opinion, Second Lead » Ghanaian banks demand up to three times from borrowers what they offer depositors – BoG rate survey reveals
The latest banking survey by the Bank of Ghana (BoG) on annual percentage rates and average interest rate paid on deposits indicates that 23 banks out of the 26 universal banks operating in the country demand at least double the interest from their most favoured borrowers more than what they offer to depositors.
Indeed, five banks in the country even demand three times more from their most favoured borrowers than what they offer to their depositors. HFC bank’s base lending rate is pegged at 29.75%, while its average interest rate for depositors is 9.33%. Intercontinental Bank’s base lending rate is 27.25%, but the interest rate for deposits is pegged at 8.40%.
International Commercial Bank’s base lending rate is at 26.75%; however, its average interest rate on deposits is at 7.67%. Prudential Bank has 28% as its base lending rate, while its average interest rate is 9.59% and Standard Chartered Bank’s base lending rate is pegged at 25.50%, while the average interest on depositors is 8.40%.
The widest interest margins with regard to the difference between average deposit rate and the base lending rates as demanded by the banks are HFC Bank (20.42%), International Commercial Bank (19.08%), Intercontinental Bank Ghana (18.85%), UT Bank (18.8%), Fidelity Bank (18.78%), Prudential Bank (18.63%) and BSIC Bank (18.63%).
Conversely, the lowest interest margin is charged by Stanbic Bank at 11.5%.
The statutory regulator of the banking industry, the central bank, publishes these rates to promote transparency in the pricing and provision of banking services.
Banks operating in Ghana offers the widest interest rate margins compared to other banks operating in Africa.
The situation even gets worse when a comparative analysis is made between the average deposit rates and the effective lending rates to enterprises which include charges and commissions levied by banks, such as commitment fees, management fees and facilitation fees. For example, the interest spread demanded by Access Bank between its average deposit rate and its effective lending rate to agriculture is 30.96%.Unibank demands a margin of 30.6% in its lending to commerce and UT Bank 29.07% in its lending to the construction sector. Most other banks display similar traits, according to the statistics emanating from the Bank of Ghana.
It is instructive that such interest margins are up to three times the current consumer price inflation rate, which was 13.32% as at March 2010.
However, BusinessWeek has learnt that in actual fact the real interest margins are often narrower than the BoG’s statistics suggest. This is because many, indeed most banks do not report their highest cost funds as deposits in their returns to BoG. Rather, they report them simply as managed funds or ‘other funds.’
There are several other reasons for this; one is that they do not have to provide non-interest bearing reserves with the BoG against deposits which they instead report as other forms of funds. Another is that banks are reluctant to admit to taking relatively high cost funds because this may be interpreted (wrongly) as the result of liquidity problems and also because they fret that other potential depositors if they are aware may also demand for similarly high rates.
The defence that the banks make publicly however is that in the current dispensation of fallen inflation and benchmark interest rates (measured by the yields on short term government treasury bills) they are usually locked into relatively high, earlier negotiated deposits rates which prevent them from lowering their effective lending rates as quickly as they would like to do.
Nevertheless, the latest statistics released by the BoG will intensify the already palpable resentment by depositors and borrowers alike that the banks are making excessive interest income at their expense. Indeed, this sentiment is shared by the BoG, which in fact is why the central bank makes public their deposits and borrowing rate in the first place as a less than subtle way of pressurizing to demand narrower interest margins. Ironically however, the interest margins currently demanded on average by the banks are higher than what they were when the BoG first began publishing their interest rates a couple of years ago.
Credit: Elorm Desewu &Toma Imirhe
Source: BusinessWeek
I am at a lost, shocked and worried about how the banks are treating the citizens and businesses in Ghana. I am surprised that the Bank of Ghana do not have any regulation to control the banks in terms of fixing of the base rate. This resulted in the high interest rates charged by the banks in Ghana. Let me say that it is long overdue.
How can the Bank of Ghana see these banks do their own thing? Per the high rate charged by these banks, it brings hardship on the people of Ghana. If a Finance Minister who owns a bank yet want to improve the life of the ordinary Ghanaian continue to charge high interest rate. Why can’t his bank charge less interest rate yet his bank charges 30.6% per the above report ‘Unibank demands a margin of 30.6% in its lending to commerce’
If I take a loan for four years, at the rate of 30.6%pa, I will end up paying over 150% to them as interest. This is killing. This is not Godly. In the advance countries, the rate is between -2% to +5%. It is only in Africa that we kill our people by charging high interest rate. UT Bank, Fidelity Bank,HFC bank, and all the banks that charge high interest rates are just killers.
I pray that there will be a revolution in the banking industry that will compel the banks to fall. I urge the citizens to join credit unions since the rate there is much lower. PEOPLE SHOULD ALSO KEEP THEIR MONEY IN ASSETS OR HAVE SAFES AND KEEP YOUR MONEY AT A SAFE PLACE. THIS WILL HELP YOU PREVENT THE HIGH CHARGES THE BANKS NORMALLY DO.
They can not gamble with our money. Government is doing all it can to help the masses but it looks like the people in these banks are bringing her efforts back. The prime rate is low at 13.3% yet interest rates(base rates) are high.
Now the base rate is their minimum rate charged to their risk free customers. Only God knows what happens to the relatively risky customers.
Good right up and we want more of such reports.
GHANAIANS wake up. It is about time we fight the banks for their selfish deeds. What are they using the money for? The banks make more money yet they live in rented buildings. They do not invest in the country. They outsource their employee just to reduce cost and sack them at will.
We will fight for Ghana- Kwame Nkrumah’s Ghana. Long live Ghana, long live President Atta Mills and thanks for your better Ghana agenda.
It’s so apporling to see how this foreign banks are causing a lot of havock to our poor Ghanaian communities, we work for this banks yet we are not seeing any meaningful contributions made by this Banks.
However, they are still operating from rented buildings and rendering very poor customer service to their valued customers, Bank Of Ghana been the main regulatory financial body in the country, the poor people are crying massively to you to save us from this mess and have a control fixed prime rate and base rate for this banks and depositors, i therefore call on all Ghanaians to wake up from their slumbering and join the fight for good and enjoyable banking systems in the country, let us join the credit unions to ensure fairness and a sound sleep savings…. ‘A word to the wise is enough’ am done!!!