The government of Ghana’s quest to digitalise the economy has come on time – amid the COVID-19 crisis whereupon digitalisation has been on the rise across the globe.

The government of Ghana's quest to digitalise the economy

The government of Ghana’s quest to digitalise the economy has come on time – amid the COVID-19 crisis whereupon digitalisation has been on the rise across the globe.

The IMF purports that a successful and inclusive digital economy is dependent on five key factors: these include digital infrastructure, digital platforms, digital financial services, digital entrepreneurship and digital skills.

However, Ghana’s banking sector has been through great turbulence recently. The latest was the banking sector clean-up – which was criticised by many holding the view that bailing out these financial institutions would have been more beneficial than a clean-up. This debate is far from over, as several researchers are delving deeper into it.

Amid the turbulence faced by the banking sector, digital banking transactions seem to be costly to individuals and small and medium-sized enterprises (SMEs). Individuals and SMEs are unable to fully maximise the services offered by banking institutions due to the cost that comes along with them. For instance, SMEs find it difficult to acquire loans for expanding their business operations due to the requirements and interest rates.

Also, individuals opt to make more cash-in-hand transactions than digital transfers. As such, SMEs are propelled to have cash-in-hand readily available to make business transactions. This created opportunity for various theft cases, causing both SMEs and individuals to lose their capital/funds – which could have been avoided in the digital banking system.

As ironic as the situation appears to be, SMEs and individuals prefer cash-in-hand transactions in order to minimise cost. Unfortunately, the cost these individuals and SMEs try to avoid sometimes leads them to incur much more cost. The World Bank’s report titled ‘Ghana Digital Economy Diagnostic’ says access to affordable and appropriate digital financial services is essential to draw individuals and businesses into digitalisation of the economy. Nevertheless, the cost of digital transactions seems not to be affordable for most people and businesses.

The quest for individuals and SMEs to skip digital banking can be traced to the cost and lack of education on the benefits of digital banking. In Europe, most banking transactions (within the scope of individuals and SMEs) cost nothing when making digital transactions within the country or within the European Union.

However, in some cases, the recipient has a token deducted from money received from the sender. In view of this, it will be essential for banking institutions in Ghana and the Bank of Ghana to review the cost of digital transactions and their approach by which digital transactions are performed, and make well-known their benefits. A well laid-out approach to execute the above suggestion would appease the critics and convey the benefits of engaging in digital transactions to individuals and SMEs. Also, government can offer incentives for individuals and SMEs to partake more in digital transactions. In turn, this will mitigate the rising incidents associated with moving large lump-sums of money among banking institutions, SMEs and individuals.

As the African continent seeks financial services digitalisation, it will require digital transactions to be affordable and inclusive across African countries for the continent to actualise digitalisation in the financial sector. The execution of this vision starts from the national level. If small-scale entrepreneurs and individuals are unable to bear the cost of digital transactions and, ironically, (in some cases) lose their capital upon withdrawal from the bank, then the question “who truly bears the cost of banking digitalisation?” still holds: is it SMEs, banking institutions, the government or all the above? The facts speak for themselves.

The writer is a doctoral candidate at Alexandru Ioan Cuza University.

His research is centred on financial integration, trade openness and financial technology.


Leave a Reply