Successful implementation of the Domestic Debt Exchange Programme (DDEP) could impact positively on growth and expansion of the country’s financial technology firms (fintechs), president of the Ghana Fintech and Payments Association, Martin Kwame Awagah, has said.
According to him, the programme, which secured over 80 percent participation at its closure has potential to revolutionise the fintech ecosystem – provided it is successfully implemented.
The DDEP is part of government’s broader response strategy for addressing the country’s current economic challenges, including unsustainable public debt at more than 100 percent of gross domestic product (GDP). It is also to help protect the economy and enhance government’s capacity to service public debts effectively.
Speaking to the B&FT, Mr. Awagah observed that successful implementation of the DDEP will close the country’s financing gap and enable government to meet the debt-to-GDP sustainability target of 55 percent.
“This will help in reducing government’s debt burden, lower interest rates and boost investor confidence – which could benefit fintech companies looking to raise capital or expand their operations, thus contributing to overall macroeconomic stability and creating a more conducive environment for investment and business growth,” he said.
Rating agency Fitch Ratings, in its latest rating, described the recently-completed domestic debt exchange programme as distressed due to a significant decrease in the agreed-upon terms compared to the original contract.
The ratings agency emphasised the importance of this evaluation since the exchange is necessary to prevent a conventional payment default. Consequently, the nation’s long-term local currency Issuer Default Rating (IDR) has been downgraded to restricted default (RD) from ‘C’.
“This debt exchange constitutes a distressed debt exchange under the agency’s criteria – given this material reduction in terms vis-à-vis the original contractual terms, and given that the exchange is needed to avoid a traditional payment default,” Fitch said.
Mr. Awagah is however hopeful the programme will be a success, and that it will enhance operations of fintechs and other businesses as the innovations and offerings to be rolled out “will be geared toward addressing the pain points of a highly competitive market”.
“It will boost business operations through market competition and increase the revenue generated by these firms, as cost-effective operational modules will be adopted to provide cost-efficient products and services to consumers; and this will in effect impact job creation and government revenue in the form of taxes paid by these businesses as well as consumers in the long run,” he added.
Against this backdrop, Mr. Awagah urged fintechs to leverage latest technological advancements and position themselves strategically to take advantage of opportunities that may come from the DDEP.
He said the sector has potential to lead the country’s recovery efforts by “deepening financial inclusion” and propelling economic growth in the process.
“This can be done by leveraging digital technology to develop new products and services which meet the needs of consumers who are facing financial challenges in the country. Thus, a customer-centric and affordable digital product,” Mr. Awagah said.