Photograph — ise.ie

The Ghana Stock Exchange (GSE) Managing Director, Kofi Yamoah, recently indicated the need for financial institutions to grow as he called for the merger of banks in the country. He also advocated the integration of markets (both traditional and emerging) for all countries in West Africa. He cited low capital base as one of the reasons why the merger is imminent.

According to him, SMEs are unable to get loans from these banks due to their low capital base, so the SME owners often explore alternatives such as looking for foreign banks and financial aid to assist their businesses. “Foreign investments aid in the injection of overseas capital into the economy, thereby allowing for the generation of more investment funds to spur production and growth”, says the International Institute for the Advanced Study of Cultures, Institutions, and Economic Enterprise.

The banking industry in Ghana consists of 28 fully licensed commercial banks in service of a national population of over 25 million people. In Yamoah’s opinion, if bank mergers were to successfully take place, commercial banks would have a larger capital base and this will increase the fortunes of indigenous banks and be beneficial to SMEs trying to get access to capital from within the country.

Currently, due to the mushroom manner (ineffective management and improper communication models) in which banks are operated in the country, banks often lose deals to foreign banks. “It is sad to say that some of these smaller banks want to keep their nature as it is. It is not good for the economy because if they become bigger they will be able to write bigger deals such as cocoa syndicated loans, oil and so on”, he said.

However, a 2014 report by Price Water House Coopers (PwC), says bank executives in Ghana are more focused on “seeking agile business relationships that offer exit flexibility, rather than permanent marriages that entail the complex fusion of systems, operations and cultures”.

Also, banking executives in the country believe that electronic banking, mobile banking and POS will most likely drive very significant growths in revenues, especially through non-interest income streams, as well as lead to growth in the industry’s balance sheet. They also posit that investment in technology that will aid convenience in banking, more than anything else, will positively affect the banking industry because it places services at the fingertips of customers.

Below is a graph from PwC of technological factors that will likely affect the future of banking in Ghana, according to the banking executives questioned on the subject.

Price Water House Coopers (PwC)
Price Water House Coopers (PwC)

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