Viewpoint :Mahamudu Bawumia

There are certain pieces of soft infrastructure that have to be in place for issues such as high interest rates and banking penetration to be solved. Notably, to achieve lower interest rates an environment must exist in which people have unique identities, preventing them from taking out a loan, refusing to pay it and then going to another bank with a different name and doing it again.

In Ghana we have gold, oil and bauxite and many more natural resources, but they will not be an engine for growth unless we have these other pieces of soft infrastructure in place as well. A central focus of our government has thus been to formalise the economy through technological innovation. There are several things that are hard to achieve due to the predominance of a large informal economy, and we wish to remedy this. From our homes to our businesses and classrooms, from the farm to the hospital, technology is changing the way we work, enhancing efficiency and productivity. Any country that wants to compete cannot afford to lag behind, and Ghana is no exception. Some of the key areas of digitalisation that we have undertaken include a national identification system, a digital address system and mobile payment interoperability.

We are in the process of rolling out a national ID card, as we need the population to have unique identities. This is being done biometrically to remove the risk of identity theft, and will work to streamline all collected data about individuals, whether with regard to banking or health. For the government, this means there will be increased transparency and no more “ghost workers” in the civil service, collecting multiple payrolls.

The mass issuance of national ID cards is well under way, and by the close of 2019 we expect at least 90% of the near 30m-strong population to have unique ID numbers. This is critical for data-based planning, and the delivery of government services to poor and rural populations. It will be the backbone of the digital economy, and within ECOWAS the card will become an e-passport. We have also moved to quickly implement a national digital address system. Historically, it has been difficult to locate an address, and navigation was based on landmarks. To address this, we used a GPS system to categorise the country, and create a framework whereby every 5 sq metre patch of land and sea has an address. This is allowing e-commerce and location-based services such as Uber to thrive.

Financial inclusion is another serious concern that digitalisation is providing an answer to. We have high mobile phone usage, with penetration at 136%, but only about 40% of people have bank accounts. A great deal of money transfers have always taken place within telecoms networks, but not between them or out of the telecoms network. In addition, there is the e-zwich biometric card that offers basic financial services for the unbanked. Mobile payment interoperability is the system we introduced to let the banks, telecoms firms and e-zwich connect to each other, in what we call the inclusion triangle, an ecosystem where money can move freely across platforms. This was an ambitious task, with different sectors protecting their respective territory, but its implementation is something that benefits everybody and helps bring excluded persons into the formal sector. With this, Ghana’s mobile payment system is now the most advanced in Africa. This monetary digitalisation is also used for government payments, and is expected to significantly aid domestic revenue mobilisation. It is already in place across a few ministries, and will be completed by the end of 2019.

Central to all of this is the idea that if you have a unique ID and address system, it becomes possible to make an effective credit reference bureau. This, combined with increased financial inclusion, will begin to encourage the reduction of interest rates in the economy. The risk premium that the banks charge due to the various unknowns will decrease, and with it the interest rate. Additionally, as the supply of savings into the financial system increases, as is occurring, there will be a further downward impact on interest rates.