 Opening
of the Financial Sector
Instructively, Ghana’s financial community is evolving and broadening its base to meet the country’s economic development plans. The government in collaboration with the International Development Association - a wing of the World Bank - initiated in the late 80s an ambitious program to restructure the banking sector in order to revamp it to meet the challenges of an emerging economy.
The result is an upsurge of banking activities and intense competition among the major banks, such as the Ghana Commercial Bank and SSB Bank (formerly known as Social Security Bank) which were recently partially privatized, as well as international banks such as Barclays Bank, Standard Chartered Bank and Ecobank. They have adopted prudent measures including strong corporate banking, corporate finance, and have heavily invested in upgrading their technology. Total assets of the banking industry, according to experts, now stand at well over one billion dollars, more than double what they were just five years ago.
Seventeen banks are presently operating in Ghana. Though a few were originally set up as development banks, they now all virtually operate along commercial lines. Four of the banks set up as merchant banks are predominantly undertaking commercial banking activities. Commercial banks operating in the country are currently required to maintain a minimum of 43 per cent of total deposits in liquid reserves in accordance with BOG regulations.
Mr. Jean Aka , Managing Director of ECOBANK , a transnational merchant bank, says the growth of the financial sector largely remains in the hands of the BOG, which fixes the rediscount rate. This is the benchmark upon which commercial banks base their interest rate. The current rediscount rate is 27 per cent.
In spite of the large number of banks already operating in Ghana, the sector is benefiting from the liberalization which has paved the way for a number of private banks to enter the industry.
Analysts say that the motive of most of them is to cater for the market niche that has been created by the bigger banks which are moving more and more towards the corporate sector and leaving the small entrepreneur without credit facility.
| Mr. Alex Ashiabor , Executive Chairman of the Metropolitan and Allied Bank , the first joint venture private bank with 30 per cent Malaysian equity interest to enter the main stream banking sector, said the vision of the bank is to provide good efficient service to small and medium scale entrepreneurs who so far have not fully benefited from the main banking sector. So far the bank has recorded some successes, Mr. Ashiabor added, "in terms of deposits we have been growing at the rate of 30 per cent average per annum and in terms of loan portfolio we are around 28 per cent. With more resources we will be going public by floating shares on the Ghana Stock Exchange by the year 2001".
Almost all the banks operating in the country recognize that they will have to keep pace with modern banking technology to ensure that they become competitive and stay in business. A senior bank official says the banks have also stepped up their activities to help cope with crisis which could be sparked by the year 2000 computer glich. They have ensured that they will not be caught up with the Y2K problem. Standard Chartered and Barclays Bank have gone ahead in introducing satellite banking and ATM machines into the banking industry.
There are also non-banking institutions operating in the country. One of the largest, the Social Security and National Insurance Trust (SSNIT) invest in almost all the sectors: education, healthcare, tourism, commercial agriculture and property development. "I believe SSNIT can contribute most to investment in this country. With our surplus, we stand really to invest along with foreign partners who can complement our resources to generate jobs and produce returns for SSNIT and the country", said Mr. Charles K. Asare , the Director General.
"You have to know what you want so that you can get the right partners who can help you realise your investment goals. We have started defining the areas into which we want to move, our priority areas being the agro business. I feel Ghana is well endowed with natural resources, good climate and soils, well positioned geographically to produce fresh vegetables and fruits for the European market or even flowers to compete with the East African markets or Caribbean markets and the technology is very simple. These are areas I believe we should look at as well as at food production for local consumption", Mr. Asare added. |
GHANA
