Tuesday, Aug 03

Financing The Future: Why a Thriving Ghanaian Capital Market Matters

Ghana’s financial system has undergone remarkable growth over the past years, with total assets reaching 54 per cent of GDP as at End-December 2019. However, long-term financing has been historically low reaching about 14 per cent of GDP in 2019 as compared to short-term financing of about 38 per cent of GDP in 2019. The capital market has been at the fulcrum of accelerating growth of long-term financing, albeit its role has been underestimated.

As a consequence, Ghana’s Capital Market far from mimics the development trajectory of Capital Markets in advanced economies as the sector’s control of total assets in Ghana’s financial sector is low- about 6% of total assets within the capital market as at 2019. Currently, only thirty-six (36) companies are listed on the Ghana Stock Exchange (GSE), and six (6) on the Ghana Alternative Markets as of May 2021. Market capitalization as a share of GDP was 13.4 per cent as at year-end 2020.
Furthermore, the capital market is highly concentrated with the three largest listed companies active in the mining and telecom sectors, accounting for more than 70 per cent of market capitalization. Specifically, the Fixed Income Market (FIM) or bond market has improved in recent years but remains dominated by government securities.

These notwithstanding, market regulators are optimistic about the growth of the capital market as Ghana’s capital market performance picks up speed, outperforming its peers within the region.

For the first half of 2021, the GSE made positive returns of about 36 per cent to investors. To have arrived at this feat, it is worthwhile to consider the development trajectory of Ghana’s capital market over the years.

The Development  of Ghana ’s Capital Market since the 1990s


Since the establishment of the Ghana Stock Exchange (GSE) almost 31 years ago, Ghana’s capital market has grown significantly. Throughout the years, the GSE has set up three (3) markets, through which companies have raised over GHS 18 billion in long-term capital. On the equities market, shares worth GHS5.5 billion have been traded, accruing 25 per cent in average annual returns to investors in the last 30 years. The fixed income market (FIM) has also traded in excess of GHS347 billion in the last six (6) years.

Considering the foregoing, the capital markets ecosystem comprises of different market players from regulators, exchanges, stockbrokers, fixed income dealers, trustees, and fund managers, among others. Cumulatively, the establishment of the GSE has led to remarkable progress in capitalization which currently is about GHS61.3 billion as of June 23, 2021, up from GHS3.05 million since the 1990s. Also, throughout this period, the average returns on the GSE as measured by its Composite Index stands at 25 per cent.
Moreover, the sector has had its highs such as the twice mention of the Exchange as the most innovative Exchange in Africa in 2009 and 2018 respectively by African Investor (Ai). More recently, the GSE has made an impressive run since 2020, when it returned 36.15 per cent on the Composite Index as at year-to-date June 23, 2021, albeit, following series of underperformance in 2018 and 2019.

Furthermore, trading in the Fixed Income Market amounted to GHS103.5 billion as of 23rd June 2021, reflecting over 95 per cent of increase in volume of trade compared to end-year 2020.
To buoy the industry’s growth sustainably, the Government of Ghana through the Ministry of Finance (MOF) in collaboration with the Securities and Exchange Commission (SEC) have developed a 10-year Capital Market Master Plan. This remains the biggest news for the sector, in recent times.

KEN ofor
Kenneth Ofori-Atta, Minister for Finance and Economic Planning (Ghana)

The Minister of Finance, Hon. Ken Ofori-Atta, in his speech at the launch remarked: “It is my hope that this Plan will achieve its intended purpose of providing a deep, efficient, diversified and well-regulated capital market with a full range of products attractive to domestic and international investors”.

Ms. Abena Amoah, Deputy Managing Director of GSE indicates that: “this plan will position Ghana’s domestic market as the preferred choice for investors and issuers by improving diversity of investment products and liquidity, increasing investor base, strengthening infrastructure and improving market services, and improving regulations, enforcement and market confidence.”

In climaxing the series of events working to accelerate the progress of the sector is the development of the Ghana Commodities Exchange that was launched in 2018.

Challenges and Opportunities within The Capital Market

From the above, it is evident that one perennial problem has been unresolved throughout the development of the capital market. This has a lot to do with the market’s ability to create a dynamic ecosystem that adequately provides support to the private sector to drive growth and accelerate job creation for better livelihoods.


Reacting to why this perennial problem has persisted, Ms. Abena Amoah indicated that “this is due to several fundamental issues including: (a) low number of listed securities as a result of the ownership culture of people in the country; (b) low liquidity as the private pensions schemes are not optimally playing their role in the equities market; (c) limited investor participation and lack of financial literacy, which means a low saving culture among Ghanaians; (d) lack of government macro incentives to attract companies to list; (e) limited product portfolio; (f) inadequate capacity of market players; (g) lack of long-term vision of indigenous businesses.”

On the whole, the capital market assumes a plethora of opportunities for private sector actors. Recounting these opportunities, the Deputy Managing Director informed that the exchange serves as a “platform to raise long-term financing to support business growth and financing long-term projects of businesses”. Also, the sector continues to expand investment options which businesses can tap by launching new products such as green and social bonds, derivatives, among others.

Moreover, the sector is quite flexible and is able to partner with Fintechs to drive innovations in the sector. It is a formidable avenue to “upscale financial literacy” and inclusion. Still, there is untapped potential for SME or bond market as well as pension funds.

The Financial Sector Clean-up and the development of the Capital Market

In 2019, the financial sector clean-up which began in the banking sector led to some spillovers into the capital market sector as a result of the interconnectedness between banks and other sectors within the financial system. According to the Bank of Ghana 2019 Financial Sector Review, the total exposure of other financial institutions to banks as at year-end 2019 was approximately GHS3.73 billion.

With majority of these exposures in the form of deposits and investments, Pension institutions were the most exposed (GHS1.03 billion), followed by Specialized Deposit-Taking Institutions (GHS998.87 million) and Securities (GHS768.16 million).

Particularly, the fund managers industry showed signs of distress, as many were unable to honour redemption requests, prompting the regulator (Securities and Exchange Commission) to revoke the licences of 53 fund management companies as at November 2020. This was partly due to their inability to unwind investments. At the time, fund managers had taken increasingly greater risks to cover fixed returns promised to their clients. That aside, there were other risks such as exposures to related parties, sectoral concentrations and governance related weaknesses.

In describing the aftermath of the clean-up on the capital market, Ms. Amoah observed that the destabilizing conditions weakened confidence in savings and investment appetite among the public. “However, recent turnaround gains in the banks have ushered a new wave of confidence in the financial sector.”

Furthermore, she noted that the BoG’s increased capital requirement, new corporate governance directives, among others have helped sanitize the sector. More so, “the tightening of regulation and compliance by SEC has reinforced adherence by players in the capital market and confidence is bouncing back slowly”.

Moreover, the outlook of the sector is one that reflects a bounce back to a better and safer investment climate as “retail and corporate investors are now looking for safer investment options”.

And the banks, collective investment schemes and the Stock Exchange are now in the best position to offer them, she opined.

Comparatively, the current structure of the financial sector, which has the banking sector commanding a huge chunk of assets with only minimal asset control for the capital market sector brings to question whether such a trend is growth-enabling.

That said, the capital market’s role within the financial sector space, according to Ms. Amoah, has been grossly underestimated so far. She further revealed that “given the right attention, the capital market will play a significant role in supporting businesses with long term finance and provide platforms for investors to make good returns, to accelerate economic development.”

Concerned about banks controlling majority of the assets in the financial sector, Ms. Amoah expressed her worries as she noted that such structure does not help in any way to accelerate economic growth.

Compared to other jurisdictions, the capital market, she averred, forms an essential part of any economy and thus used as a barometer to gauge the performance of the economy in many developed countries.

To ensure an accelerated transformation of any economy, according to the Deputy MD, businesses should be able to raise long-term capital to expand without facing constraints. The existing trend is such that high interest rates are characteristic of the banking sector, “and companies tend to borrow short-term loans from the banks to use for long-term projects which puts pressure on them and thus hinders growth.”

To accelerate economic growth, the right sources and purpose for capital creation should be used, this simply means that for long-term investment in a business, the capital market, which was created for that purpose, especially the equity market, must be employed. This will ensure growth in businesses in the country and hence economic growth.

The National Development Bank and the Capital Market: Solving the same problems?

The government fast-tracked plans earlier this year to set up a national development bank, which one of its functions is to provide funds to existing universal banks and financial institutions to provide long-term lending to businesses.

Prior to this development, the private sector has been constrained with access to long-term financing.

In explaining the overarching aim for the establishment of the Development Bank Ghana (DBG), the Minister of Finance, Hon. Ken Ofori Atta underscored that the development bank will help solve two important constraints within Ghana’s financial system namely, the lack of long-term funding, and the lack of adequate funding to the productive sectors of the economy.

As a result, some opinions were that the National Development Bank (NDB) was coming to overshadow the operations of the GSE in raising long-term capital for businesses.

However, Ms. Abena Amoah explained that “the GSE and the NDB will assume complementary roles in ensuring access to long-term capital for businesses.”

The NDB investee companies can use the GSE to raise additional or different forms of capital, and the NDB itself should use the GSE to exit its investments. The long-term capital needs of Ghana’s businesses, quasi-Government institutions and Government itself, requires a broad range of well capitalized and regulated institutions to meet those needs.

According to the Deputy Managing Director, “the GSE continues to be a viable platform for companies to raise long-term capital and for investors to enjoy dividends, interest payments and/or capital gains as the company grows.

The GSE, as a well-regulated market, ensures that investors have transparency in how companies are governed, that is, companies are to disclose any price sensitive information (Corporate actions and financial statements), and this deters companies from taking unnecessary risks that will hinder their growth.

Future prospects and expectations for the Capital Market

The capital market holds much promise, and for the GSE, the country is on track to become one of the well-developed markets in the region. The current performance of the capital market indicates an increasing potential of the sector with investment culture slowly picking up.

Similarly, “with the right support and better macroeconomic variables as well as incentives, the capital market should improve further,” the Deputy Managing Director opined. She further averred that should “all players provide utmost support in the flawless execution of the 4 pillars in the 10-year Capital Market Master Plan, this will transition the country’s capital market from a frontier market to an emerging market.”

Going forward, expectations are that the successful implementation of the 10-year Capital Market Master Plan will suffice to deepening and strengthening the capital market as well as accelerate the transition from a frontier market to an emerging market.

Furthermore, on the part of the GSE, the focus is on the implementation of its 3-Year Strategic Plan as follows: (a) Become the preferred platform/leader in the provision of financing and investment for both public and private sectors; (b) A demutualized entity operating at optimal capacity with an innovative and competitive orientation; (c) Transform from a frontier to an emerging market and be recognized as the preferred entry port market into the West African Exchange market.

AAmoah Profile Pic Low
Deputy Managing Director,
Ghana Stock Exchange
Profile Summary
First Female Executive Director,
The Ghana Stock Exchange
Alumna of UGBS,
The Stanford Graduate School of Business,
Harvard Business School,
University of Denver’s Daniels College of Business.


Peering Into The Future: Banks’ Dominant Strategy In Response To Fintech Disruption

Peering Into The Future: Banks’ Dominant Strategy In Response To Fintech Disruption

There is little novelty about the fact that banks are among the most rapidly changing institutions across the business landscape. Banks have gone through several facets of growth, and at every stage, three very vital elements are foundational to the transformation— evolution in regulation, customer behaviour and technology advancement– coupled with the emergence of new competitors.

Thus, with much certainty, the future of banking will not be a continuation of the past. New technologies will transform banking as we know it, providing both opportunities and challenges for the banking industry. While this phenomenon holds strong validity, it is no less peculiar to banks alone. Meanwhile, boundaries within the banking industry are getting blurrier and are widening the scope of products and services that banks can offer. But that also means the ease of entry of competitors.

Within this context, banks face ‘more’ fierce competition now, and Fintechs are the new competitors. Fintechs are more agile and disruptive, and specifically, are gaining market traction rapidly. Their presence has become more visible and well-accepted within the financial services’ ecosystem.

In this rapidly changing industry, what is banks’ dominant strategy with this new competitor?


According to EY Fintech adoption index, the adoption of Fintech services increased globally from 15% in 2015 to 64% in 2019. Within same period, consumer adoption rates increased exponentially in developed and emerging markets such as UK, China, India, Russia, Netherland among others. That notwithstanding, Africa is quickly emerging strong in the Fintech space, globally.

In recent years, Africa has leveraged on the increased penetration of internet connectivity and internet use to serve as the best space for Fintech start-ups. Particularly, the success story of MPESA in Kenya, starting with mobile money services, has echoed the wide range of possibilities in the Fintech space. Currently, Fintech start-ups are growing rapidly in other regions of the continent including Ghana, Angola, Botswana, Cape Verde, inter alia.

Fintechs also leverage on their interoperability with other financial services to provide digital solutions to consumers. Fintech payment solutions are largely interoperable with Mobile Network Operators (MNOs) and banks in order to provide payment solutions to customers. For instance, Slydepay, a Fintech company in Ghana, supports the transfer of money to Ghana from credit or debit cards issued from non-Ghanaian banks. Users of this service can cash out their Slydepay money from any of the local mobile money networks.

Furthermore, Venture Capital investments into Fintechs has seen the Fintech industry skyrocket into higher growth levels. Fintechs have the highest penetration in South Africa, with 94% of individuals having regular access to the internet. In Q1 of 2020 alone, Fintechs raised close to $350 million. South Africa led the way with $112m in investments, followed by Nigeria, which raised $74m, Kenya at $62m and Egypt at $51m. In December, 2020, Zeepay, a Fintech startup in Ghana raised $940,000 in seed funding from GOODsoil VC to scale up its services into new territories across the continent.


Specifically, the revolution of Fintechs in Ghana has been rather recent. And landmark developments have been from independent Fintechs. That is from the use of mobile money services by Telcos such as MTN, and later Vodafone, Airtel-Tigo, to independent payment solution space— Zeepay, Expresspay, SlydePay, IT consortium, Hubtel, Accelerex, Digi teller, just to mention a few. Now, consumers can make mobile payments, money transfers, access loans and raise funds, as well as manage portfolio of assets using their mobile devices.
Prior to these developments, a little over a decade ago, banks were largely focused on their traditional business. At their nascent stage, the penetration of Fintechs seemed rather unlikely and
unanticipated. However, with the breakout of mobile money services by the telcos, especially MTN in 2009, that spurred a whole new shift for banks’ recognition of a likely competition from Fintechs.
The use of mobile money services has been supported by the Central Bank, as the regulator recognised the role mobile money services play in deepening financial inclusion. Thus, regulation by the Central bank aimed to accelerate this process. As the acceptance of the mobile money services grew, other Fintech start-ups joined, thereby increasing their presence within the financial ecosystem.

From then on, Banks’ response has been mixed, considering that mobile money services and other Fintech payment solutions have come to stay, banks began adopting strategies to either adopt the innovation and integrate into existing business or partner Fintechs for innovative digital solutions. For instance, Zenith Bank, UBA, Fidelity Bank among others have all formed partnerships with Fintechs. Some other commercial banks such as GCB recently launched a digital wallet service, G-Money which is fully interoperable.
Ghana has transformed its Fintech industry to embrace the use of smartphones and applications in transactions. Available data suggest that, there are over 11 million active users on mobile payment systems, with banks recording over 80% of their transactions as originating from electronic and digital channels. The Bank of Ghana (BoG), reports that about 71 Fintech companies operate in the country.


The COVID-19 pandemic has accelerated banks’ response to Fintech disruption. From banks limiting their branch access and contact hours, to the fear of the COVID-19 virus tainting paper notes and coins, the pandemic has accelerated the changing relationship between customers and their banks. And this, in no doubt, has been a great test for the industry— risk several banks losing touch with customers and disguised accelerated growth via innovating.

All the while, it has also brought into sharp focus, the need for banks to explore ways to get in touch with their customers. Thus, a whole new debate on the response of banks to Fintech disruption has been brewing as a result.

The contention is whether banks should aggressively compete with Fintechs, thus, disrupting them by providing new digital products or to collaborate with Fintechs, leveraging on the agility and innovation of Fintechs.

Recent happenings indicate the growing recognition of the input of Fintechs toward increasing financial inclusion in the country. As such the Bank of Ghana has issued enhanced Payment Services Provider license to some selected Fintech companies in the country. This development indicates recognition of the impact of Fintech companies within the financial services landscape.


By playing their dominant strategy, banks make an optimal move regardless of the course of action of Fintechs. Considering the foregoing, banks in Ghana have been faced with one of two responses to make: to either play the Fintech game too, via competing head-on or collaborate by forming partnerships with these Fintech companies.

With the former move of advantage, large banks are formidable enough to either disrupt the innovation or embrace it completely. With the latter move of advantage, banks focus on where they have comparative advantage, while also leveraging on the agility and innovation of Fintechs.
To illustrate, MIT Sloan displays a framework that categorizes these responses to disruptive innovation. Based on the framework, two factors affect banks’ response: motivation and ability.



Judging by current actions, most banks in Ghana, especially, large banks are at the top right quadrant. They have literally moved far away from displaying high ability but low motivation to respond to the disruption, as with those in the top left quadrant. Now, most banks in the top right quadrant display high ability and high motivation to respond to the disruption. Albeit, the response required within this quadrant had been gradual a few years ago. However, the new normal of banking, facilitated by COVID, is accelerating the process.

Essentially, there are several dynamics to responding to disruption at the top right quadrant. First, banks can attack back by disrupting Fintechs— playing one game. That is, banks can compete head-on by emphasizing new, non-traditional product or service attributes by targeting new customers.

With this decision, overtime, the Fintechs scale up and draw-in loyal customers of banks, thus overtaking banks, and the cycle goes on and on. That notwithstanding, banks can decide to adopt the innovation by playing both games at once. However, such decision is based on a cost-benefit analysis.

By emphasizing the top right quadrant, how banks choose to adopt is the real question. Banks may choose to adopt the innovation by either operating separate organizational units or by integrating the innovation into existing business. Meanwhile, banks can also adopt the innovation by collaborating to compete.
Each of these decisions rest on the extent of the ability of banks (i.e. capital, resources, and expertise) to keep innovating, since the capital involved is huge. The current situation in Ghana indicates a mixture of these responses. While some banks have adopted the innovation by integrating into their business, such as the GCB’s G-Money, some others are collaborating with Fintechs.

However, adopting the innovation through collaboration between established banks and Fintechs yields a win-win for both sides; banks gain the agility and innovation of fintechs, while offering years of customer loyalty, scale and established networks alongside. Banks also do not have to commit huge capital to have their own Fintech start-ups.
Even so, banks may be caught up in the unending conflicts between focusing on their traditional business and then operating Fintechs. Furthermore, Fintechs have already penetrated the informal market and are therefore making inroads already. Thus, by collaborating with Fintechs, banks can have access to this new market of customers to improve the banking sector.

Going forward, collaboration between banks and Fintechs should be deepened, while also aligning with bank’s strategy and values. And also they should benefit both partners in order to ensure long-term alignment and the longevity of the collaboration.

Breaking away from the pack in the next normal of retail banking

Breaking away from the pack in the next normal of retail banking

In the not too distant past, retail banks in Ghana were largely branch-centered (bank’s share of customer deposits was tightly connected to the size of its branch network). This model strictly required in-person visits to banking halls for the completion of bank transactions and this to a very large extent, least attracted the unbanked majority.

However, retail banks are now faced with a new force to reckon with, to either innovate, or risk being left behind. Customers and/or consumers are becoming more sophisticated and aggressively expect smart digital banking that is readily accessible and tailored to their immediate needs.

The government’s move to digitalize the economy as well as consumers’ desire for simple, fast and reliable digital technologies have mounted pressure on banks to improve customer experience, reevaluate branch expansions and better streamline their processes. The COVID-19 pandemic has made it even more necessary for banks to accelerate the existing technologies and explore the addition of new ones.


Webp.net compress image 1

Pre-pandemic times: Digital solutions & Innovations after the Banking Sector clean-up

Before COVID-19 surfaced, some banks were already breaking away from the pack with innovative solutions that met changing consumer expectations and facilitated banking service deliveries. Even so, some of these high-performing banks took advantage of the recent banking sector shake-up to streamline operations and lead the newly reconstituted market. The leverage one retail bank therefore had over another was the consumer-preferred digital services and innovative solutions in banking service deliveries.

A number of banking executives when asked about their views concerning the new banking reforms, especially regarding how they would use the new minimum capital, 75% of the banks mentioned that they would consider expanding their market through new digital product and channel development rather than brick and mortar branch expansion. For others, operational efficiency will result from introducing new technology-based products and channels.

Approximately 83% of the respondents said they expected to invest significantly in technology and create agile businesses over the medium term, which will be crucial to meet customer demands and grow profitability.

Accordingly, a number of banks indicated that innovation was growth-enabling, as such, they rated technology and digitally-focused companies (eg. Fintechs) as partners that could be tapped into to ensure bank growth.

There are quite a number of digital services which are commonly used in the retail banking that include: point of sale systems; partnering with Fintechs; integration of mobile money; electronic banking services.

The integration of mobile money in bank service deliveries was identified as having the most impact on banks. 80 percent of bank executives indicated that mobile money is having the greatest impact on bank’s growth.

Moreover, some 30 percent of banks interviewed noted that delays in integrating mobile money on their platforms cost them some retail customers. Also, 60 percent responded that electronic banking was having a positive impact on their businesses. Another 30 percent of bank CEOs said that point of sales systems had a relatively low impact on their banks whilst as low as 20 percent said that it had a high impact on their banks.

ONE GRaSource: PwC (2019). Banking reforms so far: Topmost issues on the minds of banks’ CEO’s

 COVID-19 Impact on Banking

In this same context, the emergence of the COVID-19 pandemic has deepened the need for quick transformation among the yet-to-explore banks as well as the little-transformed banks. As it stands now, a “wait and see” approach would not suffice any longer.

Indeed, it is with no doubt that, the COVID-19 pandemic has adversely impacted on the banking industry. According to a PwC banking survey, one in every two bank executives (50%) interviewed adduced that credit operations have been hard hit by the COVID-19 crisis.

The COVID-19 era led to the closure of some bank branches as a cost containment measure in the midst of the partial lockdown and also, customer demand patterns were disrupted. Banks had to move beyond their comfort zones to offer reduced interest rates, defer interest payments, and in some instances, defer principal payments of their clients. As anticipated, banks’ non-performing loans (NPLs) shot up and bank operating costs also increased beyond sustained levels.


“Considering the sudden disruption in economic activities and uncertainties that the country faced after the first two cases of COVID-19 were reported in Ghana, it is not surprising to note that 68.8 percent of banks in Ghana reported a fall in patronage of banking services while 18.8 percent recorded an overall increase. The increase, according to these banks was driven by association with customers whose businesses were boosted by the pandemic.

“The bank executives interviewed asserted that although banking services were identified as essential activities during the partial lockdown, many customers avoided the banking halls and resorted to other mediums of exchange and store of value,” asserts PwC.

According to data from the Bank of Ghana, already existing distribution channels of banks (such as ATM and POS) increased in number during the COVID-19 crisis. Between March 2020 and October 2020, the number of ATMs deployed increased from 2,159 payment terminals to 2,222 payment terminals respectively. Also, more Point of Sales Terminals were deployed, increasing from 9,381 terminals to 10, 278 terminals between the same periods.

Furthermore, the value of mobile money transactions between March and October increased from GHS33.8 billion to as high as GHS58 billion. Thus, the share of banks’ transactions via mobile banking distribution channel most likely increased accordingly.

In the same vein, the main delivery channel of banks which received most patronage during the COVID-19 crisis was mobile banking (56% of bank CEO’s affirmed), based on the PwC banking survey. This notwithstanding, other innovations in digital banking platforms such as Automated Teller Machines, internet banking and corporate electronic banking also remained beneficial.

two graSource: PwC (2020) The new normal: Banks’ response to COVID-19

 Beyond COVID-19: The Next Normal in Retail Banking

As earlier noted, the COVID-19 crisis has created a new course for banks: one that de-emphasizes the premium placed on putting up more branches to one that emphasizes maximizing banks’ capacities.

Banks that are going to lead the next normal of retail banking are those that keep on searching and thinking on creative solutions to make banking convenient, easier and affordable to the consumer. Such banks do not hold the view of “let’s wait and see,” as that would amount to losing out on the full benefits of innovating.

This is against the backdrop that, consumers’ quick adaptability to the COVID-19 restrictions that encouraged physical distancing and barred movements, will still be maintained as a new trend and adopted to encourage ‘less of in-person’ visits to banking halls.

Going forward, the fact that experts suggest that the impact of the pandemic would be felt in the economy for decades should also be infused in plans in order to better position banks to be adequately prepared for other shocks that may surface. Banks should be flexible by taking on a broader role of tracking consumer expectations and behavior changes so as to move in their direction and meet their needs as they arise.

Also, as banks identify innovative solutions and adopt the use of new digital services, they must be focused on bridging the information gap in terms of customers’ knowledge on the use of the service as well as strengthen cyber securities which may disrupt banks’ processes if not tackled.

Rising banking fraud – Who is to blame?

The 2019 banking industry report by Bank of Ghana on fraud activities in the banking sector indicates that fraud cases increased from 2,175 in 2018 to 2,295 in 2019, representing an increase of 5.5 per cent.

Although the increase in cases for the period under review was marginal compared to increases in previous years, there is still a cause for concern, especially when about 94 per cent of the reported cases involved staff of banks who were supposed to protect depositor’s money.

The Bank of Ghana reported that the marginal increase in the number of fraud cases reported may partly be attributed to the improved efforts by the Financial Stability Department to identify, monitor and to ensure compliance with reporting of fraud cases in the industry.

The Central Bank also noted that the various forms of advanced technologies adopted by financial institutions have made the banking sector more susceptible to various risks such as phishing, identity theft, card skimming, vishing, email fraud and more sophisticated types of cyber-crime which therefore required that banks put in more efforts to protect customers.

While banks have been quick to blame customers for incidences of fraud, citing reasons such as customers disclosing their PINs and certain vital information to third parties, customers have also in turn blamed banks for failing to protect their funds. Some have also blamed the regulator for failing to institute measures to protect customers from fraud.

But, speaking in an interview with Mr. Philip Danquah Debrah, Head of Business Operations, e-Crime Bureau, he said all the three stakeholders have a role to play as far as banking fraud is concerned.

BankingECRIME                                        Mr. Philip Danquah Debrah, Head of Business Operations, e-Crime Bureau

He said following several engagements with industry players, it had become evident that the issue of bank fraud was a major worry for all the players. He, however, commended the Financial Stability Department for taking charge of the situation.

He said the players in the industry engaged the Financial Stability Department regularly to present their industry perspective on some of these developments.

“it has become quite inconvenient for us because every now and then, we engage and speak about this same issue, but we don’t seem to be making enough progress on it. But specifically, with regards to the issue of financial crime, suppression of cash is classified as non-cyber related fraud and we need to do an assessment of why we are seeing an increase in this particular area.”

Rural bank cases

According to the report, Rural and Community Banks constituted 55 per cent of the total cases, while commercial banks and savings and loans institutions reported 23 per cent and 22 per cent of the cases respectively.

It is curious for one to want to know why a larger proportion of the reported cases occurred in the Rural and Community Banks as compared to the other categories of financial institutions.

To this, Mr. Debrah attributed it to the fact that the rural banks have failed to take advantage of technology in their operations and were still relying on individuals who move around to mobilize deposits in homes and businesses.

Graphical Representation of Fraud Cases Per Fraud Type Source:


 Now, if you analyze that carefully, it turns out that the rural banking sector have not really transformed into the digital domain in terms of taking advantage of technology to transform their banking procedures and the way they engage with their customers.


And so, once we have this teaser, it means that the rural banking sector has a lot more of deposit mobilizers; that is, people that the banks engage to go round businesses and individuals to mobilize cash as deposits.


So obviously when we have such a scenario, coupled with the poor monitoring and evaluation, we will easily find people absconding with such monies and that has been the business for such people.”


 Customers partly responsible

Mr. Debrah further stated that customers need to acknowledge their personal responsibilities in the growing fraud activities in the industry as some of them fail to make due diligence before giving out their monies to people who come to them as staff of the banks.

This is because their investigations have shown that individuals just commit monies to people without ensuring that they are getting the monies into their accounts.

This is compounded by the poor monitoring from the banking institutions which then create an opportunity for people to engage in such practices.

He was however quick to add that, this did not mean the clients should be punished but it calls for a shared responsibility.

“It has become a culture, a bank recruits somebody, they don’t do background check on the person and the banking sector is also such that people move from one bank to the other. There are no proper checks and the person goes ahead to engage in similar activities where the monies don’t even end up in the customer’s account. So when the person absconds, the bank cannot trace where the person lives to even establish contact for prosecution and that money goes down the drain. So clearly, it’s a mix of issues which we have to look at critically.”


Involvement of bank staff

The report indicated that 94 per cent of the fraud cases reported as suppression of cash and deposits were perpetrated by staff (either contract or permanent) of the financial institutions.

It is quit baffling as to what might force workers of financial institutions to engage in such fraudulent activities.

Mr. Debrah indicated that this was as a result of the fact that the system in the banking industry creates enough opportunities for workers to exploit.

“It’s a million of issues. Once you run a system that create opportunities, there is the incentive for fraud. It will be pre-mature to attribute this to low salaries. But every institution needs to strategize and find ways of flushing out bad people.”

He went on to say that, there was the need to critically access the risks that people were bringing into the institution before employing them.

He was of the view that constant monitoring and the right systems to report fraudulent activities, will help flush out such people in the banking sector.

Role of government

Looking at the important role played by a strong and resilient financial sector, including deposit-taking institutions in economic development, the government has a role to play in ensuring the safety of depositors at the various deposit-taking institutions.

Mr. Debrah believes the only thing government could do is to enforce the laws governing the financial industry.

He attributed the earlier banking crises that happened in the country to lack of enforcement and compliance of the banking regulations.

“I think it’s an issue of enforcement of the regulations. The government need to pick up such issues at the go so they can address them without delays. If this is done, it will make people confident to deposit their monies in these institutions, rather than watching it to result in the collapse of the banks. The lack of confidence makes people patronize the mobile money since they can easily get access to their money.”

BoG’s responsibility

Mr. Debrah said the BOG has the ultimate responsibility as a regulatory body of deposit-taking institutions.


The Bank of Ghana ultimately has the responsibility but I think that usually when it comes to the issue of cash suppression, it boils down to how well the rural banks are also able to transform their operations in the digital space. This will make operation and monitoring easier and apparently transaction becomes easier. The rural banks should see how best they can invest in technology so that they will be better positioned to handle depositors’ cash.”


According to him, the Bank of Ghana has given licenses to some third parties to roll up platforms that will support transactions of financial institutions. Therefore, institutions that do not have the financial capacity to install such systems can contact these licensed third parties to do that on their behalf.

“It takes money, it takes time and if they cannot develop these platforms themselves, they can get a reliable third party to provide that service on their behalf. But apart from that, you know that mobile money subscription has increased exponentially in the past 5 years and the rural banks can also take advantage of mobile money to enhance their banking systems.

“Mobile money can be used by the rural banks to limit the money suppression. There is the need for more education so that people can take advantage.”

Banks’ ISO certification

He also mentioned that although there was a limited number of banks with ISO certification which should be a worry for customers, there are different ways of managing risk that banks could explore.

ISO is a governance framework that makes institutions follow the right procedures. ISO is quite expensive and most of these institutions will not have the funds to implement it.

“Organizations need to do a monthly risk assessment to know their level of exposure especially with regards to digital platform risks and vulnerabilities. This will help track criminals that will like to take advantage of such vulnerabilities. So, it is a combination of factors and institutions need to do regular training of staffs, technical, medium-technical and non-technical people.”

Way forward

To help minimize, if not completely eliminate, the menace of banking industry fraud in Ghana, the finance expert recommended that; “The banks should take charge of protecting customer’s deposits but individuals should also take some responsibility to protect themselves.

“This is because what we have seen now is that financial institutions are recording fraud because people who use their services are vulnerable. Individuals must take precaution for whatever devices they are using for their financial transactions.


“You need to know the environment you find yourself and the kind of people you are dealing with so you don’t let yourself out. We always point fingers at the banks as if they are not doing anything but the individuals have a role to play. We need to also support the system as individuals.”

The Central Bank has also recommended that banks as well as deposit-taking institutions do proper vetting of prospective employees before they are finally employed.

Again, equal remuneration should be given to both permanent and contract staff in all financial and deposit-taking institutions, due diligence from bank customers when dealing with cheque transactions and customers are also encouraged to use efficient electronic payment methods.

Telecommunication players were also encouraged to strengthen their cyber-security systems as well as enhancing strong monitoring and evaluation system.

Banks begin to reel under COVID 19 scourge;...

Banks begin to reel under COVID 19 scourge;...

The COVID-19 pandemic has triggered a state of emergency around the world, with the global economy reeling under its scourge. The effects of this pandemic has been felt in every economy across the world and no sector of the economy has been spared the brunt of this once in a century pandemic. From the manufacturing sector to entertainment, sports, tourism etc., every sector of the Ghanaian economy have had to deal with the harsh effects of the COVID-19.

One sector of the economy which has been in the discussions during this period has been the financial sector, which is the fulcrum around which all economic activities in the country evolve and the life blood of every economy. With every sector being impacted in a different way, the banking sector is the latest to start showing signs of the negative impact of the virus.

Over the last couple of months, international firms like the KPMG, Deloitte, PwC, among others have outlined some of the implications the COVID-19 could have on the banking sector in Ghana and the latest report of the Monetary Policy Committee of the Bank of Ghana on developments in the sector in the first quarter of the year appears to be confirming the fears of these institutions. The report expressed concerns that banks in the country were beginning to feel the pinch of the pandemic, as all the key performance indicators of the sector contracted in the first quarter of 2020.

Under the period under review, assets grew by 3.5 percent which was lower than the 5.7 percent growth recorded in the first quarter of 2019. Deposits also grew by 0.7 percent, lower than the 6.9 percent growth in 2019, with credit growth also dipping due to the slowdown in demand for credit and tight credit stance by banks.

The central bank believes the slower growth rates recorded during the first quarter of 2020 reflects the emerging impact of the economic slowdown and rising risk aversion because of the COVID-19. On an annual basis, although the industry’s balance sheet growth performance was strong, the banks’ quarterly assessment point to a slowdown in business activity emanating from the COVID-19.

With borrowers facing job losses, slow-down in business activities, and declining profits, banks in the country were expected to start feeling the pinch of the pandemic. Hotels, Arline’s, pubs, nightclubs, tourist sites for instance have seen no business or cash flow since March, but, however have expenditures such as rents, utilities and salaries to pay. This has led to laying off of workers, with those remaining receiving half salaries. This clearly was expected to have an impact on banks deposits.

Due to the lockdown, many businesses were shut down, with others also operating at half capacity, a situation which affected their cash flows and ability to repay loans they have taken from banks. Many predicted this was going to have a severe impact on the non-performing loans ratio of banks and the report from the BoG confirmed this fears, as the non-performing loans ratio of the industry inched up in March 2020.

“This was mainly due to the decision of banks to slow credit extension while monitoring the impact of the COVID-19 pandemic on the economy. In the outlook, the evolving economic and operating environment could pose some challenges to the sector. Banks continue to project tightening of credit stance to protect their balance sheet although credit demand could pick up,” - BoG

Banks in the country as at May ending had granted loan repayment holidays to the tune of GH¢1.6 billion to customers and businesses who have been affected by the pandemic.

IMG 20200703 WA0002

Banks resilience to shocks

Over the years, banks have demonstrated their resilience to shocks and the COVID-19 pandemic represents one of the many shocks banks have had to deal with in the past. In the last two years for instance, Ghana’s banking industry witnessed some turbulence which led to some banks losing their licenses and just when things appeared to be stabilizing, the COVID struck.

The business of banking is managing risk so while COVID will present real first time risk to some sectors and institutions, banks are used to such risks due to the financial crisis of 2008 and several other financial meltdowns in the past, which means that banks should be in a better position to manage the risk emanating from the COVID-19. With banks always being at the forefront of managing risks, customers therefore do not need to panic because of this latest set-back as banks have some fundamental pillars on how to manage risks.  

Bank of Ghana www.enmoregh.com 749x375 Frontview of the Bank of Ghana

The BoG, in its report assured the public that this was no cause for alarm as its latest stress tests suggested that banks were resilient and well positioned to withstand mild to moderate liquidity and credit shocks, which could emanate from the emerging operating environment.

“The lower-than-expected growth rates in the key performance indicators during quarter one reflect the challenging operating environment for the banking sector due to COVID-19. Notwithstanding this, the financial sector soundness indicators remained healthy. The latest stress tests conducted in April 2020 suggest that banks remain well positioned to withstand mild to moderate liquidity and credit shocks based on strong capital buffers and high liquidity positions. Capital Adequacy Ratio was well above the revised regulatory limit of 11.5 percent, liquidity remains strong, and efficiency indicators have improved,” - BoG

Key Financial Soundness Indicators (FSIs)IMG 20200703 WA0001

Policy measures by BoG

To help banks withstand the COVID-19 shocks, the central bank rolled out a couple of measures to support them. The Primary Reserve Requirement was reduced from 10 percent to 8 percent to provide more liquidity to banks to support critical sectors of the economy and the Capital Conservation Buffer (CCB) for banks of 3 percent was also reduced to 1.5 percent to enable the banks provide the needed financial support to the economy. This effectively reduced the Capital Adequacy Requirement from 13 percent to 11.5 percent.

The central bank as part of the measures also lowered the Monetary Policy Rate 150 basis points to 14.5 percent to enable banks to lend to customers at a reduced rate. The BoG in its report expressed confidence that these policy measures would help boost the sector’s credit operations and moderate emerging risks in the outlook.

” Measures by banks to control operational costs, minimize operational losses, and contain credit risk while supporting credit expansion to critical economic sectors will be crucial in balancing growth and stability in the sector,” the report noted.

Changes in retail banking

Although the pandemic has come with its own challenges to banks, it has not all been gloom as we have also seen some positives in terms of banks customer’s adoption to their digital channels. Prior to the COVID-19, banks were faced with the challenge of getting their customers to adopt their online channels. With the pandemic forcing banks to close some of its branches and some staff, having to work from home, customers who were slow in adopting the digital channels of banks were left with no other option than to use these channels.

Forbes reported that at its peak in April, the COVID-19 pandemic resulted in an estimated 3 billion people worldwide being in lockdown, which meant that businesses and consumers had little choice but to use online services. This has led to an increase in the usage of banks digital channels within this period. While this may come as good news to the banks as it reduces their cost of operation, the question that has been on the minds of most people have been whether the pandemic has changed the banking business for good or whether customers would return to the brick and mortar structures to transact their businesses post COVID.

Speaking at a Webinar, the President of the Chartered Institute of Bankers, Mrs. Patricia Sappor, said banks could no longer go back to their old ways of operating since the needs and psyche of customers had changed significantly as a result of the COVID-19.

She said investing in large and expensive edifices to accommodate employees could be curtailed as banks have found ways for workers to work more remotely and digitally.

“This will reduce the operating costs of banks since lesser expenses on utilities and depreciation are incurred.”

The pandemic has also given the government’s initiative of moving the economy to a cashless society a shot in the arm, as people are now increasingly moving towards digital payments. Mrs. Sappor said this presented banks with the opportunity to aggressively drive the digital agenda whilst encouraging customers to jump onto the digital train using channels like Mobile Apps, USSDs, Internet Banking, and ATMs to facilitate transactions.

THE TECH ATTACK– How Banks Can React to Avoid Losing Huge Margins

A look at strategic options and tactics for banks in the event of a real incursion by big tech firms into financial services.

Banks have been under pressure from tech firms for some time. However, there’s a strong chance that this pressure will intensify as big tech firms increasingly leverage their strong consumer franchises and digital expertise to compete with banks. As such, there are needs to consider the strategies and tactics available to banks, and how they might emerge stronger and more profitable from the big tech incursion.

Big techs have not yet taken significant market share outside China in financial services, and tend to avoid regulated markets; and when they do look to enter banking, they usually start by partnering with banks.

But big tech firms are making headway in ways that might not be measurable in terms of traditional market share. Consider big tech’s approach as disintermediation rather than direct entry into the regulated domain of financial services, or of their focus on the most capital-light and digitizable areas of business that are closest to their core. Take Amazon’s foray into small business lending, Apple’s entry into payments and consumer finance, or Facebook’s announced launch of Libra, a cryptocurrency.

It is imperative that banks respond to this potential now, as once big tech firms achieve scale it will become near impossible to compete on price, or with their ability to offer a distinctive client experience that builds consumer loyalty and trust. Ultimately, if not resisted, the tech attack will destroy the financial services industry’s margins—by taking some themselves and returning the rest to consumers.

So how to react? Banks can use a 2x2 matrix (Exhibit) to structure possible responses depending on the likelihood of required action and its incremental cost.

Exh. 1

No brainers are actions that are necessary but do not incur significant incremental costs. Banks should make a detailed scenario analysis—establishing the value at risk, understanding the motivations and capabilities of potential attackers (both global and domestic), and positing potential strategies for a counter-attack. An effective tool here is a “black hat” strategy exercise that helps banks understand what an attacking player would do; or traditional war-gaming. Banks should also consider engaging with regulators early on, and educating their board members about the threat so that they are prepared for possibly radical and costly action. They should also closely monitor the market for emerging “star” companies in their target client segments and track partnerships that other financial firms are pursuing. 

Banks should also continue to forge ahead with the efforts they are—or should be—making to stay ahead of the competition. For example, digitizing processes to ensure a great customer experience and to keep costs down will also reinforce a bank’s defenses at the most common attack points for tech firms. The same goes for advances in digital marketing, which reduce the cost of acquisition and improve consumer engagement. Banks should also continue to work on building customer loyalty through loyalty programs and explore how to turn their local presence and customer-specific knowledge into bulwarks against tech incursion.

Insurance policies are actions with relatively low incremental costs that address risks with small but non-zero probability of occurrence. They can be thought of as ways to future-proof the business.

Raising barriers is an example. Monoline financial services firms should consider diversifying into adjacent financial businesses—these areas don’t have to be profitable for the banks if they address a broader set of customer needs; for example, expanding from consumer finance to retail banking. By bundling products in a simple, transparent way, banks can make an attacker’s niche proposition look inferior. Banks with a narrow product set may need to find new partners to make this tactic work, expanding to, say, insurance or wealth management, or adding features like analytics, personal financial management, or peer-to-peer payments. Banks should also consider experimenting with new technology; for example, advanced payments schemes.

Another way to secure a stronger position in the market is through pre-emptive partnerships; for example, teaming up with local players (e.g., to share data to the extent permitted by regulation), with government (e.g., to provide payments infrastructure), or with large e-commerce players (e.g., to provide point-of-sale lending or joint loyalty programs). Making such partnerships work at scale would likely require the skill to build APIs related to some of the bank’s core functions, and having a dedicated partnership unit/venture fund.

A proactive regulatory stance also fits with this strategy. Regulators are interested in supporting a healthy, profitable, banking sector. Issues to address in this context could include: how opening banking to big tech might impact industry profitability in the long term; what kind of regulatory framework would ensure a sustainable competitive landscape (e.g., degree of open banking; requirements for data protection and on-shore data storage).

Big pre-emptive bets are the most important of the higher-cost actions, but success can be elusive. For a bank, the most critical decision is whether and how to significantly raise up your local game in payments, focusing on value-added services to merchants, and pushing hard to deliver new technology in payments, such as biometrics. Moves of this kind are costly, but could secure access for a bank to a unique and valuable set of customer data. Banks could also enter the data management space, as Australia’s Data Republic did by building an industry-wide data aggregation infrastructure. Or banks could focus on a client-data-protection agenda; in this latter case, banks can justifiably claim superior capabilities than their tech counterparts. 

Another type of a big bet would be to build an ecosystem—either focusing narrowly (like Hungary’s OTP in B2B and real estate) or pursuing a multitude of directions, like Ping An and Sberbank. Or simply scale linkups with tech companies themselves. For example, tech firms often lack non-digital distribution. In addition to risk management capabilities and a balance sheet, a bank can provide the physical network to complement an attacker’s digital channels, as well as contributing knowledge of local markets and customers. These capabilities are valuable to tech firms, for client onboarding, customer engagement, troubleshooting, and logistics. Consider Amazon’s venture into physical retail in India.

Finally, Plan Bs are actions banks should consider to deal with “nuclear scenarios”—only to be used as last resorts. Here’s one: temporarily slashing margins to the point where an attacker is dissuaded by the potential cost of investment. If a bank drops fees on payments to close to zero, it will be very difficult to create incentives for merchants to switch to a different provider. Banks can supplement this move with a carrot-and-stick approach—offering generous rewards, or disincentives, to prevent clients switching to new entrants. Other Plan B options could include:

  • Becoming the back-office of choice for the tech entrants into financial space—which would require a distinctive cost position; risk, cyber-security and operational capabilities; and a superior technological infrastructure
  • Building a digital bank adjacent to the main franchise that would match the customer experience and positioning of tech attackers; the risk of cannibalization may be outweighed by the overall defense of market share.

Size is a clear advantage in all four scenarios. Players with dominant market shares can invest to keep up with techs’ innovation, and have a better chance of fending off attack, especially where regulators provide something of a barrier to entry. Medium-size players have some options; they may be able to build a niche offering, or partner with tech giants. It is the smaller players who are most exposed. From the shareholder perspective, divesting such an asset—especially in challenged markets—might be the right strategy. If market exit is out of question, smaller banks can mount defenses based on local knowledge, or try to grow their client base through partnerships. But in the longer run their prospects are grim.

For banks of all sizes, the first imperative is to understand the threat of big tech incursion, and the new competitive landscape, build an objective assessment of your own capabilities and market strengths, and develop a plan of response. It is important for banks to take action on all these fronts if they wish to maintain their position in the face of a big tech move into financial services.

A Tax Analyst, William Demitia, has urged the Social Security and National Insurance Trust (SSNIT) to efficiently analyze its ability to allow contributors draw down on funds to mitigate the impact of COVID-19 before taking such a decision.

The Erstwhile President John Mahama in a digital conversation to address the people of Ghana last month suggested that SNNIT contributors be allowed ...