Ghana on March 6, 2022 at Cape Coast will celebrate its 65th Independence anniversary on the theme, ‘Working Together, Bouncing Back Better’— a clarion call on all Ghanaians to work together towards sustainable economic recovery from the devastation caused by the COVID-19 pandemic the world over.
Independence Day in Ghana is all about celebrating and examining how far the country has come, an exercise that cannot be complete without appreciating the indescribable role the Universal Merchant Bank (UMB), played in the country’s banking and financial sector since its establishment some 50 years ago.
UMB officially opened its doors to the public on March 15, 1972, as the premier merchant bank in Ghana, at a time the country was in its growth phase having attained independence 15 years earlier. A time official of the ‘new country’ yearned to have strong financial institutions because they recognised that it was the only way to develop the nascent economy. This, gave birth to Merchant Bank as it was known in those times.
UMB lived and continues to live up to expectations since its establishment, playing instrumental roles in setting up several very key institutions, aimed at aiding the development of the newly independent Ghanaian economy.
“The Bank worked very closely with the stock market at the time which was also a sort of newish concept in trying to diversify the economy. We were also very instrumental in the setting up of other banks in the country. HFC [now Republic Bank] was one of those banks,” UMB’s CEO, Nana Dwemoh Benneh, told B&FT in a wide range interview that discussed the banking sector cleanup, the emergence of cryptocurrencies and the support for Ghanaian SMEs among other things.
Again, when the country embarked on major social, political and administrative reforms through the adoption of Economic Recovery and Structural Adjustment Programmes, UMB was very instrumental in the number of the privatisations that went on.
“So, throughout the years…[Universal] Merchant Bank was associated with some of the landmark projects and developments in the financial services sector of the country and was seen as one of the key players and a key partner in there as well,” Mr. Benneh stated.
Building Ghana through SMEs support
As the country developed, UMB developed alongside it. Thus, the economic successes and development the country managed to achieve over the years were “very much supported in no small ways by the existence of the Universal Merchant Bank Ghana Limited—a support the Bank of Ghana alluded to in its ‘Annual Percentage Rates (APR)’ report for 2021.
According to the Central Bank, UMB in 2021 was one of the universal banks with the lowest interest rates on loans offered to small and medium scale enterprises in the country.
Identifying SMEs as the backbone of the Ghanaian economy, representing about 85 percent of businesses, largely within the private sector, and contributing about 70percent of Ghana’s gross domestic product (GDP), UMB decided to be at the forefront of providing funds for start-ups and SMEs as part of the bank’s support to government’s youth entrepreneurship drive and private sector revitalization.
The BoG’s report was a good testament of the strategies that UMB started to follow, Mr. Benneh noted. He further explained that one of the things that the bank does is selecting the segments of the market it wants to service very carefully and “through that we are convinced that our brand and our positioning enables us to position ourselves very strongly within the SME sector.”
“And so, we have embarked on a strong focus on intimacy when it comes to these sorts of customers to understand or have a holistic understanding of their business and the holistic understanding of the risk factors that are associated with the business that they do which then enables us to price a bit more competitively in that field. For us, it is one of those focus areas that we are focusing on and so, we are investing quite heavily there,” he said in the interview.
Despite starting its boutique-like setup, focusing very much on corporate and investment banking, Universal Merchant Bank was and still the place where if a Ghanaian so wished, and had great business acumen and great business idea, and wanted to put together some sort of complex structures and financial modules and instruments in place to help his or her develop his business, visits.
“It is no surprise that over the last 10 to 15 years we have actually redoubled our efforts in trying to build a strong SME franchise, taking the skills of what we have learned dealing with Ghanaian businesses to create a more diversified portfolio which encourages more and more of these businesses to do business with us,” Mr. Benneh said.
Independence of the Ghanaian banking sector
The Bank of Ghana embarked on a banking sector clean-up, recapitalization, and other regulatory reforms from mid-2017 to end-December 2018 in line with its mandate to promote the safety, soundness, and stability of the financial system to support economic growth.
Although the recapitalisation process scaled down the number of banks to 23 in December 2018 from 33 in December 2016, the industry’s balance sheet indicators pointed to stronger growth performance in the key performance matrix.
“We are well regulated and it has been demonstrated that when the time comes for reforms, we are very capable as a Ghanaian industry to implement those reforms to make us even better which I think in the end proves that it is independently run,” he posited.
Asked if he did not think the cleanup which was meant to strengthen indigenous banks had ended strengthening foreign banks, Mr. Benneh observed: “The first way to compete globally is to ensure that you can demonstrate that your standards of banking are comparable to any bank anywhere else in the world. That is what the reforms sort to achieve because all banks all over the world are subjected to a certain level of criteria, be it in money laundering, corporate governance, etc.
“The reforms have largely taken us to that point where even now Ghanaian banks can be rated by international organisations because we are adopting those standards.”
Technology and the changing nature of banking
Acknowledging the impact of recent technological revolutions on the global banking sector, Mr. Benneh said what used to be competitive advantages years ago in the sector is fast becoming a less and less competitive advantage, allowing a bank to become very strong and formidable without necessarily having a large branch footprint.
Also, there have been a lot of Fintech activities attracting the attention of the customers, both SME, retail and to some extent corporate and the collaborations that will take place between banks and these Fintechs “as we go along will redefine who are the market leaders and who are not. I think that the development of technology in the banking industry is now offering an opportunity once more to level the playing field and allow people now to gain more market share,” he said.
This, he said, presented the indigenous banks especially, the Universal Merchant Bank an opportunity “to link in with this growing population of smart, savvy entrepreneurs who are using technology to create this and also attracts the attention of our customers which can literary overnight change your market share and your holding. Those are the things that offer opportunity as we go forward and getting us redefined as well.”
UMB: 50 years of existence
Having thrived and survived in the Ghanaian banking sector, according to Mr. Benneh, means one thing: “We are a pillar of this country and a pillar of this industry that we find ourselves in.” He said one of the key things the bank had done since it was established 50 years ago has been, building significant relationships with its our customers.
Therefore, what the bank wants to do in the coming years is to take advantage of all those relationships it built with institutions in the country and its customers over the years, work together and develop “what is next for these customers.”
“Our 50th year is a year we want to dedicate to spending more time with our customers to say thank you to them and also, more importantly, understand from them what their emerging needs are and what are the future needs that they are contemplating because as I said, we see a lot of change from the horizon both in consumer demand, consumer taste, lifestyle and how they are conducting businesses itself.
“So, we believe that this is an effective time to pull all these customers we have known who are indigenous to Ghana like us, to work together and develop futuristic solutions, which not only help and enhance them but will help and enhance the economy as a whole and the industry as a whole and the country as a whole…because if there’s one of the banks that can do it, it will have to be the Universal Merchant Bank by virtue of our longevity in this place and the quality of relationships we have had all these 50 years. That really will be our focus.”
