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.


After a year that began on the wrong footing due to divisions over the hotly contested and controversial 2017 presidential