Unconscionable Interest On Loans: The Ghanaian Courts' Approach

Introduction

Private lending has become increasingly common in Ghana. Individuals frequently lend money to others on terms that closely resemble those imposed by banks and licensed financial institutions. When repayment becomes due, disputes often arise, with borrowers challenging such agreements on grounds of unconscionability, illegality, fraud, duress, or undue influence. Among these, unconscionability and illegality are the most frequently invoked.

This article examines how Ghanaian courts approach interest charged on loan transactions, particularly where the lender is unlicensed and the interest rate appears excessive. It considers whether lenders are entitled to enforce such interest and the circumstances under which courts will intervene to grant relief to borrowers. Two key issues guide the discussion: whether the transaction is illegal, and whether the interest charged is unconscionable.