Experts underscore importance of strong local banks; say a brighter future hinges on their robustness

As conversations continue in earnest over the future of the nation’s economic fortunes, especially after the recent set of internal and external government-led debt restructuring exercises, there is a need for a robust domestic financial landscape led primarily by locally-owned banks.

This is the consensus from a number of key stakeholders – industry leaders, policymakers and academics – who agree that domestic banks are best placed to provide the kind of tailored financial packages required to take the economy to its next phase.

They added that failure to act fast and decisively will erode the gains that have already been made, and will see Ghana lose out on opportunities which the rapidly-evolving industry brings.

Chief Executive Officer at the Ghana Association of Banks (GAB), John Awuah, speaking at the association’s medium-term outlook presentation – jointly-held with the Development Bank Ghana (DBG) – emphasised the crucial role of strong banks in shaping the country’s economic future.

“It is not an exaggeration to state that attempts to rapidly transform the Ghanaian economy – from its current state to the desirable path of accelerated recovery – will require the concerted efforts of all key internal and external stakeholders. This lends strong credence to the invaluable role of banks in the quest for national economic emancipation through active financial sector participation,” the GAB-CEO noted.

Renowned banking consultant, Dr. Richmond Atuahene, speaking with B&FT echoed the sentiment expressed by Mr. Awuah – but added that special attention must be given to local banks, which he described as “the lifeblood of a healthy financial system”. He said they provide the necessary capital for businesses across the spectrum to thrive, drive economic growth and create jobs.

He added that deregulation of the industry to allow for more participation was a step in the right direction, adding that even the unfavourable events which have occurred form part of the ecosystem’s development.

“The decision to deregulate this space in the mid-2000s, I believe, was a very good idea; as we needed to develop our domestic institutions similar to what pertains elsewhere,” Dr. Atuahene said.

The former lecturer at the National Banking College  however expressed concern about the competencies of some persons appointed to boards of some institutions involved, saying the pattern that is found largely in the public sector continues to find its way into these key financial institutions.

He said sound corporate governance practices and robust risk management frameworks are essential for maintaining the stability and integrity of local banks, particularly at a time when trust appears to be lacking.

“We are at a point where we must take a long, hard look at ourselves. We have seen too many lapses at the very top, especially within the banks themselves. Questions must be asked about the exposure some of these institutions have had, if indeed the oversight responsibility of their board was taken seriously. We – the state, regulators, bank leaders and shareholders – must ensure that the domestic debt exchange programme and what it has brought with it becomes a positive turning point for locally-owned banks,” he explained.

“Foreign banks are unlikely to invest in sectors such as agriculture as they consider it too risky. Who is going to invest in our oil palm and banana? On a similar tangent, can’t the annual cocoa syndication loan be sourced through our local banks? It is not rocket-science, but we know what would happen if much of the profits that are repatriated were kept in the country, don’t we?” he quizzed.

A data-scientist and Associate Professor in Finance at the University of Ghana Business School, Elikplimi Agbloyor, stressed the need for technological innovation in local banks.

“Investing in cutting-edge technologies is crucial for local banks to remain competitive and meet the changing needs of customers,” stated Prof. Agbloyor.

He also highlighted that local banks should expand their product offerings and enhance the customer experience to stay ahead in the dynamic financial landscape. This, he said, will ensure that the banks have a larger market to access.