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Financial inclusion lessons from Ghana (2)

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By Obadiah Mailafia

Last week we began discussion on the evolving progress in Ghana’s financial inclusion strategy. Today we conclude by looking at issues, challenges and prospects.

WE begin by noting the crucial role played by the Bank of Ghana (BoG) in steering the financial inclusion agenda. The BoG has provided policies that support the development of branchless banking in the country.

From our own discussions with some commercial banks, it is evident that banks in Ghana are integrating their mobile banking operations with mobile money service providers to ensure enhanced financial inclusion for the unbanked.  For example, Ecobank is collaborating with Airtel to provide mobile money to unbanked subscribers of Airtel services.

CBN Governor, Mr Godwin Emefiele

Zenith Bank, United Bank of Africa and Standard Chartered Bank have also partnered with Airtel to offer banking facilities to Airtel Money Services.  Mobile money has grown in parallel with other financial electronic payment services (e.g., e-zwich, Afric Xpress, eTransact Ghana) that enable loading and sending of electronic cash, while facilitating remittance transactions via phone, among other services.

There is a perceptible gap in the rate of mobile money usage between the rural countryside and the modern urban sector. Rural and poor people are least likely to hold an active financial account; while for females, financial account ownership is somewhat below the national average. According to our findings, commercial banks are the key drivers of financial services transformation in Ghana. We found that one in five Ghanaians had a registered mobile money account, although half of them also had a registered bank account.

While reported registered use of nonbank financial institutions is rather low, it would seem that unregistered/informal use of such agencies is likely higher. It was reported that 48% of Ghanaians operate an account; some 20% have registered mobile money accounts; while 8% have non-bank financial institutions accounts.

We also found that bank accounts with digital access are by far the most common form of digital financial services; with some 80% of bank account holders reporting at least one form of digital bank account access. Mobile money accounts are the second most common form of account. Some 20% of Ghanaian adults own mobile money accounts, while some 27% have digital access to bank accounts. Some 4% of the adult population have digital access to non-bank financial institution accounts.

Remarkably, almost all Ghanaian adults owning a mobile phone possess basic literacy and numeracy and have the necessary ID to register for a formal account. There is also evidence that most are also aware of mobile money services. Unlike many ECOWAS countries, Ghanaians appear to have a rather high level of consumer engagement in advanced financial activities, with some 59% of Ghanaian adults able to purchase insurance, some 67% being able to save and some 40% able to engage in one form of investment or the other. Unfortunately, it also seems clear that few of these activities are channelled through banks, mobile money or NBFIs. Overall, the person to person, P2P, market appears dynamic in Ghana, with some 60% of adults able to send and/or receive remittances.

One of the important innovations that Ghana has made relates to the creation of a payments System Council which serves as an advisory body to the BoG and supports implementation of a sound and efficient payments, clearing and settlement system.  It is an 11-member organisation that includes, notably, the Ministry of Finance, Ghana Revenue Authority, Controller and Accountant General’s Office, Securities and Exchange Commission, National Insurance Commission, National Pensions Regulatory Authority, Ghana Interbank Payment and Settlement System and Ghana Chamber of Telecommunications.

The Chair of the Council is the Governor of the BoG. The Council focuses most of its activities on 4 thematic areas, namely, Standards, Automation and Technology; Operations; Pricing; and Legal. In addition, the BoG developed a Web-Based Data Collection Portal for collection of payment streams data from the banks and other service providers. This enhances monitoring and supervision and ensures that regulators are on top of the game.

Also encouraging has been the creation of interest on float accounts for electronic money holders. Total interest payable to holders of electronic money wallets totalled some GHC24.79 million in 2017. The successful distribution of such interest was the first time electronic wallet holders were able to receive interest since electronic money services began in Ghana in 2009.

More recently, and similar to the case of Nigeria, BoG, in cooperation with the Ghana Association of Bankers, is launching a Bank Identification Number Project. The introduction of biometric identification aims to stem the rising tide of banking and financial fraud. The envisaged benefits include: real time customer identity verification; opportunity to blacklist customers noted for miscreant behaviour, including those in the habit of issuing dude cheques; prevent identity theft; provide audit trail for over the counter (OTC) transactions; reduce the time required to serve customers; enhance the integrity and security of the banking system; a vehicle for trailing AML/CFT and other banking crimes while minimising cyber fraud; and prevent unauthorised access to customers’ accounts  while ensuring KYC  and engendering confidence in the industry.

Another important element in the Ghana approach is the institution of consumer protection measures to safeguard consumers’ interests in the use of financial services products.  Public awareness and consumer education is being pursued at the same time as windows for receiving and promptly treating consumer complaints have been opened.  The authorities receive petitions and grievances which are systematically investigated and address, including issues such as fraud and defalcation in the financial industry. The BoG has articulated two sets of Market Conduct Regulations to guide the delivery of credit services.

In spite of all the progress, a critical challenge remains that of ensuring inter-operability. To address the issue, KPIs are being developed to ensure a seamless inter-operability between TELCOs, financial services providers, banks and agents on the field. Another challenge is the question of internet connectivity, which can be rather expensive in Ghana. The digital divide remains a major challenge in Ghana. Some of the payments systems require internet connectivity which remains rather expensive in the country.

There is palpable evidence that financial inclusion has enormous potential to improve human livelihoods while contributing to national transformation. But it is clear that the right policies are in place and the framework for implementation is on course in Ghana. Financial inclusion thrives best, in my opinion, in an environment of macroeconomic stability; in a robust financial ecosystem within a well-governed country that is at peace with itself. These are important lessons for countries like ours who desire to go up that route.

In spite of all the progress that has been made, even Ghana is not yet where it ought to be. Indeed, a former Governor of the Bank of Ghana, Kwabena Duffuor, has lamented that the financial system manages to “only serve a few”. Progress requires that relevant stakeholders work together to achieve common objectives: the central government, the monetary authorities, the commercial banks, the TELCOs, financial services providers, regulators and others need to work in tandem to ensure the greatest benefit to the greatest number.

Ultimately, this is not just about economic development; it is no less than about national transformation and the quality and meaning of building prosperous democracies at the dawn of the twenty-first century.

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