Banks in Ghana have been advised to develop attractive savings products with competitive interest rates to aggressively boost the savings culture of Ghanaians.
This will be in support of the Bank of Ghana (BoG) and Ministry of Finance initiatives and encouragement for Ghanaians to have absolute confidence in the banking industry – especially as the financial clean-up of 2017-19 is bearing positive fruits.
The advice was contained in a survey titled ‘Insight into the savings culture of Ghanaians’ with key players in the banking sector. The survey revealed that majority of respondents interviewed were not interested in savings due to unattractive interest rates and a lack of the ‘save-to-invest’ loop accompanying savings products.
Surprisingly, the majority of the respondents indicated that the main motivation for saving is not the interest accrued on such products but the purpose for the savings. “87% of the respondents indicated that their main priority of saving for the long term is to get a house, for retirement, for children’s education and purchase of land,” the survey noted.
It stressed that there is the need to intensify education on financial literacy to imbibe a savings culture in Ghanaians to reach the levels of business destinations such as China and the United Arab Emirates. “We are of the view that there needs to be strong sensitization of the importance of savings and financial literacy to translate the financial aspirations of Ghanaians into reality”.
Speaking on the survey, analysts from UMB research noted: ‘There is a positive co-relation between savings per household and development rates as a general economic rule. We truly need to support the Bank of Ghana to educate all Ghanaians that we need to save so we can aggregate funds for investment. This is key for individuals, especially workers and also for the economy.”
Apart from the low savings culture among Ghanaians, the survey further showed that a significant percentage of 45.42% of the respondents have not invested before. Even though the survey revealed that there is a high tendency for Ghanaians to think of savings, the result however doubts if the appetite translates into Ghanaians actually saving.
Importance of savings
Highlighting the positive sides of savings to Ghana’s economy, the survey pointed out that savings reflect the percentage of net income not spent on current use, which allows wealth to be accumulated.
Also, high levels of gross domestic savings increase the amount of domestic resources available for investment, support businesses and decrease the need to resort to foreign borrowing in order to cover domestic investment and consumption demand by a country.
“Research has proven that there is a positive correlation between domestic savings and economic growth. It is therefore not surprising that most of the popular business destinations of Ghanaians have a gross domestic savings (GDS) as a percentage of GDP being higher than that of the world.”
The research showed that the GDS as a percentage of GDP for Ghana is marginally above that of Sub-Saharan Africa (SSA), and well below the average for the world.