Structural reforms, stability will shape banking

Story: Boahene Asamoah
A Deputy Governor of the Bank of Ghana (BoG), Dr Mahamudu Bawumia, has said that structural reforms, coupled with macro-economic stability, will deliver the robust financial services which the country requires to achieve a middle- income status.
He said while the economy had witnessed macro-economic stability, the central bank would continue with structural reforms to further promote efficiency and competition in the banking system.
Speaking at the launch of the 6th Ghana Banking Awards organised by Corporate Initiative, Ghana (CIG) in Accra on Tuesday, the deputy governor said the central bank had initiated policy reforms aimed at enhancing the transparency and competitiveness of the inter-bank money market. They were also to enhance the development of the capital market and reduce asymmetric information.
He mentioned some of the reforms as the passage of the Credit Reporting Bill, the publication of bank charges, the proposed Borrowers and Lenders’ Bill, the review of the Know Your Customer (KYC) Bill and the Anti-money Laundering Bill.
Dr Bawumia stated that “macro-economic stability is not enough”, adding that there was the need to ensure structural reforms which would propel the financial sector much further.
He mentioned other reforms as the abolition of secondary reserve requirements, non-resident participation in domestic government securities, the Foreign Exchange Bill, the re-denomination exercise and the universal banking concept.
“These are all benefits of macro-economic stability,” he said, adding that the Ghana Banking Awards were, therefore, a measuring rod to see what banks were doing and also to stimulate debate over how banks could create social and environmental values without sacrificing profitability.
“The banking sector has become very competitive with increased intermediation but improved loan quality,” he said.
Bank credit to Gross Domestic Product (GDP) was 4.7 per cent in 1990, as against 18.4 per cent in 2005, he said, adding that loan deposits ratio was 50 to one per cent in 2002, as against 66 per cent in 2006.
Dr Bawumia stated that non-performing loans stood at 19.6 per cent in 2001, as against 11 per cent as of October 2006, while net foreign currency assets to shareholders’ funds was negative 9.4 per cent in 2000, as against 43.4 per cent in 2006.
The Executive Secretary of CIG, a non-governmental organisation made up of some of the country’s “blue chip” companies, Mr Afotey Odarteifio, said the aim of the organisation was to work towards the creation of an excellent corporate environment in the country by helping to address some of the issues which hindered the growth, efficiency and competitiveness of Ghanaian companies.
He said 22 out of the 24 banks in the country would be competing for awards in 14 categories this year.
“The two new banks, Fidelity Bank and Intercontinental Bank, do not qualify for awards, since they are yet to operate for a full year,” Mr Odarteifio stated.
He said CIG was happy with the increased activity on the banking scene, adding, “We have noticed the increased level of competitiveness, the improved variety of products and services on offer and the increased activity of banks in the areas of lending, electronic banking, money transfer, among others.”
The Chairman of Interplast Limited, Mr Saied Fakhry, who chaired the function, said the banking sector, according to statistics, held a lot of promise for the country and urged the banks to improve upon the innovative products being introduced into the country.
“The future of banking in Ghana, I believe, is very bright. If contemporary banking innovations are anything to go by, such as the networking of most branches, assorted automated teller machines (ATMs) dotted across the country and inter-bank ATM cards, then I believe Ghana will be positively positioned on the world map of banking,” he stated.