The Foundation uses the following computation approach to arrive at figures used in each month’s release:
- The single figure used to represent the APR of a Bank in any given month is arrived at by taking the arithmetic average of the different APRs reported by the Bank of Ghana for that Bank. The use of arithmetic average has been adopted given the nearly absence of outliers in the APR quotes of Banks across different loan categories, at least for fifteen months. Only a handful of Banks (at most 5) have consistently – shown some higher degree of variation in their APR quotes. As the use of arithmetic averages can conceal the fact that the different APR quotes of Bank reflect the different risk levels inherent in each category of loan, a hash symbol is used to suffix Banks with outliers in their APR quotes. It is important to note that the use of arithmetic averages is not alien to the computation of metrics within the Banking industry. The Bank of Ghana, for example, has used the concept of arithmetic averages in the past in arriving at the industry average base rates and APRs.
- Only APRs reported for a Bank are used in the computation of the average APR. For example if a Bank reports APR for vehicle loans, consumer loans and agricultural loans, the APR will be computed using the arithmetic average of these three reported rates only. If a Bank reports all seven APRs, the APR reported will use the arithmetic average of all the seven APRs. It is important to note that where a Bank states a range as its APR, the midpoint of the range is taken. For example if XYZ Bank states that its APR for manufacturing loans is between 22 to 26%, the APR for manufacturing loans which will be factored into the computation of the overall APR of Bank XYZ will be the midpoint of 24% (i.e. [22 + 26] / 2)
For the month of February 2018, the Norph Bank reported three APRs, given as vehicle loans (24%), mortgage (25 to 30%) and manufacturing (22 to 28%). The APR of the Norph Bank will be:
APR = (Vehicle Loans + Mortgage Loans + Manufacturing Loans)/3
APR = (24% + Midpoint mortgage, i.e. 27.5% + Midpoint manufacturing i.e. 25%)/3
APR = (24% + 27.5% + 25%) /3
APR = 76.5% / 3
APR = 25.5%
3. The twelve-month average reported for a Bank includes the month of reporting. For example the LRD release for the month of February 2018 will include the February 2018 computed APR, and counting back to March 2017. The twelve month average for March 2018 counts from April 2017 to March 2018. If a Bank does not have a full twelve month history, the average will be computed using only the months reported. Examples of Banks falling into this category include the Heritage and Premium Banks.
4. Statistical measures of dispersion and central tendency are computed using standard formulas and / or models. In the case of standard deviation, all data points are used. The standard deviation reported uses the APRs for the twelve months ending the month of reporting.
5. Consistent with BoG reporting, all APRs stated in the LRD are rounded to one decimal place.