Banking
From The Report: Ghana 2018
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Since the late 1980s Ghanaian banks have increased in stature and number, and for much of the last decade they have enjoyed strong growth rates and large profit margins. The country’s lenders have maintained their stability, avoiding the domestic crises that have befallen some of their emerging and frontier market peers, and sidestepping much of the fallout from the global financial crisis. The tripling of minimum capital requirements by the central bank should help increase credit flow by encouraging small local banks to consolidate, resulting in bigger banks with the capital and capacity needed to clean up loan books, and steer more credit to the private sector. This will also enable institutions to finance larger and more capital-intensive projects.

The chapter contains interviews with Ernest Addison, Governor, Bank of Ghana; and Archie Hesse, CEO, Ghana Interbank Payment and Settlement Systems.

Articles from this Chapter

Overview

Safeguarding progress: New reforms aim to secure growth by encouraging consolidation and promoting best practices
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Since the privatisation of state banks and the liberalisation of industry in the late 1980s, Ghanaian banks have increased in stature and number, and for much of the last decade they have enjoyed strong growth rates and large profit margins. The country’s lenders have maintained their stability, avoiding the domestic crises that have befallen some of their emerging and frontier market peers and sidestepping much of the fallout from the global financial crisis. However, the industry faces…

Interview

Ensuring stability: Ernest Addison, Governor, Bank of Ghana, on raising capital requirements and moving towards a cashless society
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Interview: Ernest Addison What criteria does the Bank of Ghana use as the basis for its monetary policy decisions? ERNEST ADDISON: The primary aim of the Bank of Ghana is to control inflation and ensure price stability. The inflation-targeting monetary policy framework adopted in 2007 outlines a medium-term inflation target of 8% with a band of 2% either side. At each bimonthly meeting, the Monetary Policy Committee considers a broad range of factors, including global developments, the balance…

Analysis

Starting small: Authorities enforce higher standards to make the microfinance segment more reliable
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To promote a sector capable of supporting rural development, the government introduced a flexible regulatory framework for microfinance institutions (MFIs) in 2011. Since then, over 500 MFIs have registered in the race for customers, though many have gone bust or been exposed as pyramid schemes. Recently the central bank has renewed efforts to make MFIs more reliable, taking decisive action to clean up the segment in 2017. Revoke & Suspend In June 2017 the Bank of Ghana (BoG) revoked…

Interview

Cashless economy: Archie Hesse, CEO, Ghana Interbank Payment and Settlement Systems, on cash dependency and financial inclusion
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Interview: Archie Hesse How does cash dependency affect payment efficiency and the economy as a whole? ARCHIE HESSE: Cash transactions are very influential. Cedi notes are not printed in Ghana, and the cost to produce lower-denomination notes is higher than their value. There are also costs related to the disposal of deteriorated notes. Part of those costs can be invested towards moving from a cash-dominated economy to one that is more dynamic and digital. This will bring substantial savings in…

Analysis

Pooling resources: Higher capital requirements may trigger a wave of mergers and acquisitions
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Regulators are aiming to use higher capital requirements as a means of encouraging consolidation in the Ghanaian banking sector, in a bid to repeat the success of neighbouring Nigeria. In 2004 the Central Bank of Nigeria’s then newly appointed governor, Charles Soludo, faced a weak and thinly spread financial sector that failed to meet the needs of private businesses and retail customers. At the time, most of Nigeria’s 89 registered banks were smaller enterprises linked to powerful families…