Savings and Loans best-placed to maximise regulated crowdfunding – BoG

Savings and Loans (S&Ls)

Considering its vantage position on the financial services delivery value chain, the Savings and Loans (S&Ls) sub-category is best placed to take advantage of a regulated crowdfunding framework to leapfrog growing competition for its market segment, Head of Fintech and Innovation at the Bank of Ghana (BoG), Kwame Oppong, has suggested.

According to Mr. Oppong, cultural leanings and the ubiquitous nature of local crowdfunding practices, which go by various names – susu, ntuboa, among others – make crowdfunding a go-to avenue for the primary demographic S&Ls cater for. This has been heightened by the relatively low penetration of traditional financial institutions, as well as the rapid adoption of digital finance and mobile money, among this segment of the economy.

He noted that the regulated framework would protect customers from the mountain of associated risks present in the traditional space, leading to improved confidence in the operations of S&Ls and the wider financial sector. “Crowdfunding is an opportunity for you, particularly as savings and loans companies; because you are working with that segment of the population that lives by this model, you are the closest to them,” he said.

“This gives you an opportunity to present to them a better-organised approach to the informal option that they use today which is exposed to governance, security, money laundering and fraud risks, and the usual confusion when people refuse to continue,” he elaborated during a presentation at the 12th Annual General Meeting of the Ghana Association of Savings and Loans Companies (GHALSAC) in Accra.

The regulator’s representative, echoing sentiments earlier expressed by the Second Deputy Governor, Elsie Addo Awadzi, said S&Ls must be agile in their digital transformation as they face steep competition from banks, fintechs and related institutions.

He urged them to take advantage of the quantum of data they have access to, describing it as a treasure trove in the digital economy, consistent with the theme: ‘Driving Financial Inclusion Through Digitalisation: The Role of Savings and Loans Companies’.

“Many of you are sitting on information that you are not really able to harvest… As it stands right now, you are sitting on a treasure trove of data; the only problem is that it might not be well-organised and you probably do not have the capability to analyse them enough to make sound, targetted decisions; but if you explore it, you would be surprised by the opportunities that exist,” he remarked.

The BoG’s Head of Fintech and Innovation’s comments come after the sector regulator, in 2021, released policy guidelines to promote and guide the development and use of donation-based and reward-based crowdfunding products and services for institutions under its remit, including banks, Specialised Deposit-Taking Institutions (SDIs), Dedicated Electronic Money Issuers (DEMIs) and Enhanced Payment Service Providers (EPSPs).

Estimates by the Cambridge Centre for Alternative Finance (CCAF) suggest an enormous potential for regulated crowdfunding across the continent.

The centre indicates that African volumes in a variety of crowdfunding models reached US$182million in 2016, growing 118 percent from US$83million in 2015. Additionally, from a regional perspective, West Africa was leading, accounting for 41 percent of these volumes. Also, 28 percent were recorded in Southern Africa, 24 percent in Eastern Africa, and the remaining 7 percent in North and Central Africa.

Similarly, data aggregation portal, Statista, says the transaction value in the crowdfunding segment on the continent is projected to reach US$32.4million in 2022, with a compound annual growth rate (CAGR) from 2022-2026 of 8.73 percent, resulting in a projected total amount of US$45.3million by 2026.

In a development along this trajectory, the regulator for the capital markets, the Securities and Exchange Commission (SEC), in April, also published the Ghana Securities Industry (Crowdfunding) Guidelines 2022 which aims to deepen the domestic market by offering investors more options.


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