Lending Rate and Loan Portfolio of Banks in Ghana

Ghana has witnessed a tremendous increase in the number of Universal banks in the country. As a result, one will expect bank pricing (lending rate) to be competitive lending to low rates. However, this is not the case as lending rates continues to be high. This has become a disincentive to borrowing and repayment of loan, which ultimately affects both the loan portfolio quality and size of banks. The objective of this study was to examine the effects of lending interest rates on the loan portfolio of Universal Banks in Ghana. This study was largely a quantitative research. The study population was drawn from universal banks currently listed on the Ghana Stock Exchange. Since the number of banks is not so large, all the seven banks were targeted in the study. Data was collected from annual reports of the seven banks for the 7-year period between 2009 and 2016. Panel data techniques were employed. The findings from the analysis showed that there is a negative significant effect of lending rate on loan portfolio of the listed banks in the country.  The major recommendation was that, great efforts should be made by banks’ management to manage their operational cost, which will reduce lending rate and consequently reduce non-performing loans and increase portfolio size