Participants in a roundtable discussion on banking in Ghana agreed that the Small and Medium Enterprises were key to the growth of the sector and that digitization will enable banks to serve them better and remain competitive in a rapidly evolving economy.
The discussion was facilitated by African Banker magazine, the premier publication on financial services in the continent in partnership with Netherlands-based company Backbase, the creator of the Engagement Banking Platform (EBP), a unique solution supporting banks in their own digital transformation journey.
In attendance at the event were Nana Dwemoh Benneh, Chief Executive Officer of Universal Merchant Bank (UMB); Ebow Quayson, Executive Director and Head of Business Banking at Prudential Bank Ghana; Leopold Armah, Head of Digital Transformation at Prudential Bank Ghana; Emmanuel Nikoi, Head of Retail and Business Banking at Consolidated Bank Ghana (CBG); and Abel Daitey, Chief Information Officer at Ghana Commercial Bank.
Also, present were Aymen Daoud and Alexander Bailey, Regional Head and Business Development Manager – Africa respectively of Backbase. The session was moderated by Omar Ben Yedder, Group Publisher and Managing Director of African Banker magazine.
The discussion focused on how digital services can enable banks to serve SME customers better, while improving efficiency and reducing costs. SMEs in Ghana are the lifeblood of the economy, with close to eighty percent of businesses operating in the country answering to that description. There was also a consensus amongst the bankers around the table that after servicing government, SMEs provided the biggest profit pool potential.
Traditionally, banks had struggled to serve that market, owing to poor record keeping on the part of SMEs and cost of credit associated with the high risk posed by companies in that sector. The underdeveloped credit architecture, such as credit reporting systems, also serve as a hindrance in bank’s efforts to serve the sector. Leveraging technology, and new regulation such as the Ghana Card will help with KYC and lower onboarding costs.
Until recently SMEs had to rely on micro-finance institutions, who had lower barriers of entry and much more flexible conditions of service. This however proved their undoing and a cleanup of the sector embarked on by the regulator, the Bank of Ghana, saw many of these institutions losing their licenses. This has given banks another opportunity to engage with SMEs by tailoring products that suit their needs and by adopting approaches that reduce costs, including digital services.
Financial inclusion in Ghana, according to the panellists at the roundtable, has been boosted greatly by the emergence of mobile money. As many as 17 million Ghanaians have signed on to mobile money services and are now able to access credit, accrue savings and even buy government treasury bills. While Ghanaian banks had initially been left out of this revolution, panellists explained that the banks were now aggressively developing digital products to boost inclusion and attract and retain customers. One of such products is G-Money, a competing mobile wallet from GCB Bank, the state-owned and largest bank in the country.
Panellists were of the view that while they were in competition with telecommunications companies and financial technology companies, there was much to be gained in also collaborating with them for mutual benefit. Banks can leverage over the top services designed by fintech firms, for example, to attract consumers into digital services and to provide superior user experience for them. While this would mean banks sharing profits with these third-party firms, it would also result in increased user numbers and potentially greater profits.
Backbase, who have seen the rise of fintech in Africa but also in more mature markets such as the UK, Europe and the US, stressed that the uptick in digital adoption and smartphone penetration the provides a unique opportunity for banks to be able to compete with the Telcos and other payment providers who are slowly but surely increasingly providing banking services.
All the speakers were encouraged by the government’s efforts to include financial inclusion through digitization. The adoption of the Ghana Card, digital addressing systems, GH QR system and plans for an electronic currency were seen by panelists as strong indicators of the government’s desire to support the financial service sector to serve SMEs much better than they can do currently.
Digitization, it was agreed, holds great potential for banks and consumers. In pursuing a digital first approach, as all banks represented at the roundtable have committed themselves to, banks will be able to reduce their costs to profit ratio, serve more people and improve their balance sheets.
Omar Ben Yedder, Group Publisher, and Managing Director of African Banker magazine, who moderated the session expressed the hope that the fruitful engagement will yield a positive impact on industry practices and that there will be continuing engagement on the subject as the Ghanaian banking sector grows and evolves.