Calm after the Storm -The Future of Banking in Ghana

Alas! Ghana’s banking sector witnessed one of its difficult moments in history with the revocation of nine (9) banks’ operating licenses between August 2017 and January 2019 due to various regulatory breaches. It was clear that the initial public sentiments that greeted the revocation exercises resulted in the loss of confidence in the sector and characterised by the high incidence of panic withdrawals. It reached its tipping point with some indigenous banks and other deposit-taking taking institutions unable to meet their customers’ obligations.

Indeed, one would not be wrong to describe the experience over the period as a baptism of fire on many industry players. Literally, a storm could be a better description when we considered the contagion effects of the clean-up. But with the end of the recapitalisation exercise amidst some mergers and acquisitions, and the Central Bank’s determination to enforce other directives, we are regaining the much-treasured trust and confidence from the investing public.

The microfinance sector has since been cleaned up and we expect same for the savings and loans and the finance-houses’ segment. The inability to attend to the latter due to limited resources continues to dampen customer confidence in doing business with them. That put aside, it is reassuring that customer-deposits are picking up within the realm of the universal banks. Again, many of them have posted impressive first quarter results to accentuate  that the reforms hold sway the future of banking in Ghana. Based on these developments, it is just proper to avert our minds to the main drivers to the future and how we can navigate our ways to survive the competition in the banking sector.

Main Drivers

Regulatory dynamics will continue to shape the banking landscape into the future. To sustain public confidence and attract investors into the sector, we envision eagle eyes on supervision as well as compliance across the board. Anything short of that will erode all the gains we have made over the period and thereby reopen old wounds.

Malcom X, an American human right activist chiefly put it,” the future belongs to those who prepare for it today”. So, it shall be for banks with foresight and determination to invest in cutting-edge technology to drive their operations safely into the future. Elsewhere, artificial intelligence is partly influencing how some financial institutions provide their services to the public and we will expect discussions around it in our banking circles. Indeed, the emergence of digitisation has removed the traditional barriers to banking and allowed individuals and organisations to transact their businesses at the comfort of their homes or offices by the touch of a button.

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With the amendment of the Payment Systems and Services Act, Fintech (financial technology) companies will take the centre stage in redefining service delivery channels. In fact, their value propositions attract them to the bourgeoning and tech-savvy customer segment. Nonetheless, their permissible activities are limited by regulation. Going forward, banks will need to leverage on their own resources and deepen customer experience by building a stronger collaboration with the Fintechs and the Telcos. This will not only lead to the optimisation in resource deployment but enable both the banks, Fintechs and the Telcos achieve win-win results.

While many banks will continue to invest in digital channels, product development and innovations to make themselves relevant to the marketplace, their future, however, is anchored on their level of preparedness to manage the associated risks and the vulnerabilities in the cyberspace. To note, a couple of weeks ago, the Cybercrime Unit of the Ghana Police Service disclosed a frightening figure of US$105 million lost to the country through cyber-related crimes in 2018.

Since banks are the main target in such instances, a future-oriented bank cannot afford to gloss over the threats. In this regard, banks must secure their businesses and reputation by investing in robust cybersecurity architecture in line with international best practices to avert the insurgency. So far, only a few banks including the CAL Bank have complied with the Cyber and Information Security Directive in terms of the mandatory ISO 27001. We hope other banks will comply with the directive with a deep sense of commitment to improve their information security posture.

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What’s more, even though digitisation is moving at a faster speed and promoting branchless banking, brick and mortar will continue to have their physical presence, especially within the unbanked or underserved retail segment. It is now a matter of how banks can develop cost-effective strategies towards deepening financial inclusion (customer base) and increasing their revenues through relatively small branches and agencies (pharmacies, shops, supermarkets or post offices). The issue of financial inclusion has received global attention with Central Banks at the forefront of ensuring the intended targets are achieved in their countries. Banks will, therefore, need to align their strategies to accommodate changing dynamics to remain competitive.

It is commonplace knowledge that banks don’t operate in a vacuum and deploy their resources around business activities in any economy. Hence, our banks’ prospects and the ability to continue with their supports to industries will equally depend on favourable economic indicators and a sustained business-friendly environment. Businesses in Ghana want reliable power supply, government’s policies which will stimulate growth and eliminate the hydra-headed bottlenecks that suffocate their survival. The domino effects of unstable power supply in the past few years partly contributed to the erstwhile banks’ collapse since some borrowers were badly hit by the power crises. As businesses, banks foresee such headwinds in the external environment but will dread the return and the threat of “dumsor” any day.

In conclusion, the banking industry’s future outlook largely depends on the collective roles of stakeholders including regulators, the banks, government, the public, investors with vested interest, directors and staff (competences) to play by the rules while using available resources strategically.

Thank You! Thank You!! I always appreciate your feedbacks. God Bless You. 

This script was written by a Chartered Banker with a flair for feature writing. Apart from his work schedules, he edits or proof-reads corporate material for his colleagues, executive managers – including distinguished professionals working in various fields outside Banking. Through this column, his articles feature on third-party online media platforms in Ghana and outside. Email: Kwaku.Anumu@gmail.com

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