Interview: Samuel Ashitey Adjei
What appetite is there for consolidation in the banking sector in Ghana?
SAMUEL ASHITEY ADJEI: We believe that more mergers and acquisitions would help the Ghanaian market. However, this depends on the willingness and initiative of the parties involved to take advantage of opportunities and close deals.
The Bank of Ghana requested that banks increase their capital requirements to GHS60m ($35.6m) so that there would be bigger banks that contribute more to the economy and could sustain shocks to the system. Sometimes it is the responsibility of management to convince shareholders that a merger is positive, that it will add capacity to the organisation. However, a lot of mergers and acquisitions fail because there is a gap in understanding between the management and the shareholders of a bank. However, I do see greater consolidation as inevitable in the Ghanaian banking sector over the next few years.
How adequately prepared is the banking sector to finance the expansion of the oil and gas industry?
ADJEI: Another reason the central bank increased capital requirements was to create bigger and more solid banks that could take advantage of the opportunities for loan syndication as the oil and gas sector expands. Obviously, this industry demands costly financial commitments, and most of the companies that come to operate in the Ghanaian oil and gas sector arrive with external financing. However, big opportunities for Ghanaian banks will come from the supply chain of these projects. There is strong interest in the market to support the local services companies that will participate in these large projects.
What are the biggest obstacles small and medium-sized enterprises (SMEs) face in accessing credit?
ADJEI: The SME market presents a lot of opportunities for the Ghanaian banking sector, but they also represent some challenges that demand that banks focus closely on lending criteria. An initial obstacle is that a lot of these small enterprises are reluctant to share information. Sometimes the information provided is not adequate because of incorrect bookkeeping or weak administrative oversight. There can also be an issue with the level of management. Some company owners will prefer to pass their businesses on to their children, independent of their specific qualifications, avoiding giving control to someone who may be more qualified but with whom they are unfamiliar.
The banking sector can help SMEs by giving them the right tools to improve management and accounting standards, as this will have a sector-wide impact. The more SMEs to which the banks can safely loan, the more opportunities they will create in the long run.
How has the banking sector worked to increase banking services penetration and what methods are banks using to capture new customers?
ADJEI: Ghanaian banks have made a strong effort to promote and increase the use of banking services, and penetration is now between 18% and 20%. This was achieved by modernising the sector and moving away from having the branch as the only contact between the bank and its customers. The sector has made a great leap in terms of technology. Customers now bank online, through ATMs and mobile phones, making it easier to communicate with banks. I believe the next wave of growth will definitely come from mobile banking, especially in rural areas. However, for the sector to fully embrace its potential, we have to emphasise to consumers that mobile banking is a safe and easy way to do transactions and transfer money.
How active is the home financing market segment?
ADJEI: Back when interest rates were falling below 10%, the segment was picking up. However, the recent currency depreciation has rapidly pushed up rates. It is difficult to attract people to mortgages when interest rates are over 12%. As the rates start to go down once again, movement will pick up in the mortgage market.
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