By Samuel LARTEY (Prof)
In recent years, Ghana has witnessed a significant push toward digital financial inclusion, driven by the rapid growth of fintech and mobile banking technologies. According to the World Bank, by 2022, nearly 70% of Ghanaians had access to financial accounts, largely due to the proliferation of mobile money services.
Despite these gains, a substantial portion of the population and businesses still operate outside of the digital financial system, preferring cash transactions over digital payments. This article explores the reasons behind this phenomenon, supported by data, facts, and figures.
The Banking Crisis and Erosion of Trust
The banking crisis that unfolded between 2017 and 2019 has had lasting repercussions on the financial behavior of Ghanaians. During this period, the Bank of Ghana revoked the licenses of nine universal banks, 347 microfinance companies, and 23 savings and loans institutions. This resulted in the loss of billions of cedis in savings for many Ghanaians, leaving a deep-seated mistrust in the formal banking system. Even with the introduction of Deposit Protection Schemes, the scars of this crisis remain, leading many to shy away from banking with both traditional and digital platforms.
Digital Divide and Financial Exclusion
While urban centers like Accra and Kumasi have seen an uptick in digital financial services, rural areas, which make up 44% of Ghana’s population according to the 2021 Population and Housing Census, lag far behind.
In 2023, it was reported that only 32% of rural inhabitants had access to the internet, compared to 83% in urban areas. This digital divide directly affects the adoption of digital financial services, as many rural Ghanaians lack the basic infrastructure—such as reliable internet and smartphones—required to participate in the digital economy.
Moreover, financial literacy remains a significant barrier. The 2022 Financial Literacy and Inclusion Survey revealed that 56% of Ghanaians did not fully understand how to use digital financial services, further hindering adoption. This lack of knowledge makes many susceptible to fraud and cybercrime, with the Cyber Security Authority reporting a 14% increase in financial cybercrimes in 2022 alone.
Cultural and Behavioral Resistance
Despite the advantages of digital payments, cash remains king in Ghana. The Bank of Ghana’s 2023 Financial Sector Report indicated that 75% of all transactions in the country were still conducted in cash. This preference is deeply rooted in cultural and behavioral practices. For many Ghanaians, cash transactions are seen as more reliable and straightforward, with no intermediary or digital interface to complicate the process. This is particularly true in the informal sector, which constitutes about 80% of the economy, where cash is the preferred medium of exchange.
High Transaction Costs and Economic Barriers
The cost of digital transactions remains a significant deterrent, especially for low-income earners and small businesses. Although mobile money services have reduced the cost of transfers, the introduction of the Electronic Transfer Levy (E-Levy) in May 2022 has exacerbated the situation.
The E-Levy, which imposes a 1.5% charge on electronic transactions exceeding GHS 100 per day, has been met with widespread resistance. By December 2023, mobile money transactions had dropped by 24%, as reported by the Bank of Ghana, with many opting to revert to cash to avoid the additional charges.
Additionally, the lack of interoperability between different mobile money platforms and traditional banking services increases the cost and complexity of transactions. For instance, transferring money from a mobile money account to a bank account often incurs higher fees than a direct cash deposit, making cash a more economical option for many.
Regulatory Gaps and Consumer Protection Issues
Ghana’s regulatory framework has struggled to keep pace with the rapid expansion of fintech and digital financial services. Inadequate consumer protection measures have left many users vulnerable to fraud, unauthorized charges, and data breaches.
The Financial Intelligence Centre reported a 19% increase in digital fraud cases in 2023, further eroding trust in digital platforms. Moreover, the perceived lack of accountability and transparency within fintech companies has led to growing suspicion, with many Ghanaians opting to stick with cash, which they view as a safer alternative.
Challenges in Business Adoption
Businesses, especially in the informal sector, have also been slow to adopt digital payment systems. The Ghana Statistical Service reported that as of 2023, only 28% of small and medium-sized enterprises (SMEs) in Ghana accepted digital payments.
The reasons are multifaceted: high transaction fees, the cost of setting up digital payment systems, and concerns over cyber security. Additionally, many businesses operate on slim margins and are wary of the potential financial losses associated with digital fraud or system failures. For these enterprises, cash remains the most reliable and cost-effective means of doing business.
Conclusion
The digital revolution in Ghana’s financial sector has undoubtedly brought about significant changes, but its benefits have not been evenly distributed across the population. Trust issues stemming from the banking crisis, the digital divide, cultural resistance to cashless transactions, high transaction costs, and regulatory gaps have all contributed to the slow adoption of digital financial services.
For Ghana to achieve its financial inclusion goals, there must be concerted efforts to address these challenges. This includes rebuilding trust in the financial system, improving digital infrastructure and literacy, reducing transaction costs, and strengthening consumer protection. Only then can the promise of financial inclusion technologies be fully realized for all Ghanaians.
