CASES IN FINANCE – EPISODE 7: Behind closed doors: The untold financial battles of households

By  Enock YEBOAH-MENSAH

 Ghana’s biggest financial crisis isn’t in the headlines—it’s in our homes. At any moment, a family can look wealthy yet be one job loss, one loan repayment, or one cement price hike away from financial ruin. At the Asuyeboah SSNIT Flats in Kumasi, three families lived side by side.

From the balconies, life seemed ordinary—clothes drying, children laughing—but behind closed doors, their realities were worlds apart: one family wrestling with sacrifice, another rebuilding from crisis, and the last trapped by the illusion of wealth. Their stories reveal an uncomfortable truth: in Ghana today, prosperity and collapse often sit at the same kitchen table, divided only by the choices families make.

The Dansos – Sacrifice, Trade-offs, and Balance

Mr. Danso, an officer at the Lands Commission, and his wife Afia, a senior high school teacher, had carefully saved GHS 250,000 over two decades through disciplined contributions to their credit union and a rural bank. Their daughter, Adjoa, had just gained admission to study medicine in Hungary, but the first year alone required GHS 170,000 for tuition and living expenses.

At the same time, their half-finished retirement home in Ejisu sat waiting, while inflation steadily pushed building costs higher—cement that once sold for GHS 50 a bag now cost GHS 85. One evening at the dining table, the family wrestled with the choice. “Daddy, please. This is my dream. I’ll make you proud,” Adjoa pleaded. Afia, though supportive, worried aloud, “If we use everything on school, we may retire without a home. Cement prices are only climbing.” The Dansos felt torn between securing their daughter’s future and protecting their own.

Instead of choosing one dream at the expense of the other, they crafted a balanced plan. They allocated GHS 120,000 toward Adjoa’s first year—enough to cover tuition and modest lodging—while encouraging her to apply for scholarships and a student job permit to sustain later years.

They set aside GHS 100,000 for gradual construction, buying blocks and cement in bulk to hedge against inflation and ensure steady progress on the Ejisu house. The remaining funds were invested in short-term Treasury bills, providing liquidity while protecting value from erosion. Mr. Danso, with a faint smile, summed it up: “We may not move fast, but at least we’re moving forward on both fronts.”

The Mensahs – Crisis, Recovery, and Building Resilience

The Mensahs once lived comfortably in Asuyeboah SSNIT Flats. Mr. Mensah earned a solid salary at a bank, while his wife Esther ran a provisions shop that reliably supported their home. Together, their combined monthly income of GHS 18,000 allowed them to finance a car loan of GHS 2,500 per month and keep their three children enrolled in private schools. Life felt secure—until everything changed.

In a wave of restructuring, Mr. Mensah suddenly lost his job. At the same time, Esther’s provisions shop collapsed after a supermarket opened nearby, stealing most of her customers. Their financial cushion vanished almost overnight. “We never thought this could happen. School fees alone are GHS 12,000 per term, and our savings are almost gone,” Esther said anxiously, her voice breaking. The Mensahs were plunged into a crisis that threatened their stability and pride.

But instead of surrendering to despair, they chose recovery through tough but deliberate steps. They sold the family car, clearing the loan to eliminate the GHS 2,500 monthly burden. They moved their children from private to public school, reducing expenses by GHS 8,000 per term while still ensuring access to quality education. Esther pivoted to a catering business, turning her cooking skills into a steady GHS 4,000 monthly income.

Meanwhile, Mr. Mensah retrained in data analytics, and within two years, he secured a consultancy contract paying GHS 10,000 monthly. Learning from their ordeal, they also built resilience by starting a family emergency fund, setting aside 15% of every income received. As he reflected on their journey, Mr. Mensah admitted: “This storm broke us, but it also rebuilt us stronger. Never again will we live without a safety net.”

The Owusus – Illusion, Collapse, and Financial Discipline

Among the Asuyeboah SSNIT Flats community, the Owusus looked like the wealthiest family. Their shiny SUV, lavish birthday parties, and holiday trips to Dubai dazzled neighbors and created an aura of success. With a household income of GHS 20,000 per month, they seemed untouchable. But beneath the surface, their finances were crumbling.

They owed GHS 120,000 in credit card and salary advance debt, another GHS 50,000 in susu loans, and were GHS 18,000 behind on rent. The truth came crashing down one Saturday morning when loan collectors appeared at their doorstep. Neighbors watched in shock as one stern collector demanded: “Pay GHS 15,000 this week, or we escalate.” The Owusus’ carefully crafted image of affluence shattered in public view, leaving them humiliated and desperate.

Forced to confront reality, they took painful but necessary steps toward financial discipline. They sold their beloved SUV for GHS 180,000, using most of the proceeds to clear high-interest debts that were draining them monthly. They downsized their lifestyle, renting a modest car, cutting out the parties, and halting luxury purchases.

For the first time, they practiced zero-based budgeting, assigning every cedi a job, starting with debt repayment and savings. They committed to living on just 70% of their income, saving the remainder to rebuild stability. Their eldest son agreed to attend a public university instead of an expensive private one, slashing education costs by more than 60%. Reflecting on the painful transformation, Mrs. Owusu admitted with humility: “For years, we chased appearances. Now, we finally understand wealth is peace of mind, not show.”

FINANCE LENS

The Dansos’ case illustrates the principles of opportunity cost and trade-offs in family finance. Their dilemma—whether to fund Adjoa’s medical education abroad or complete their retirement home—shows how pursuing one goal often means postponing another.

In addition, the time value of money (TVM) became evident as inflation raised cement prices from GHS 50 to GHS 85 in just two years, proving that delaying investments can increase future costs. Their situation also highlights the tension between human capital and physical capital: investing in their daughter’s education promised long-term returns through higher earnings, while completing their house offered retirement security and asset growth.

By diversifying their allocation across education, property, and short-term investments, they applied a portfolio approach to family finance, balancing competing priorities and mitigating risk.

The Mensahs’ experience highlights the importance of income risk and contingency planning. Overreliance on two income streams—Mr. Mensah’s salary and Esther’s provisions shop—left them vulnerable when both collapsed. This underscores the need for income diversification and the creation of financial buffers.

Their recovery shows the power of expense rationalization, as they reduced liabilities by selling their car and cut recurring costs by shifting their children from private to public schools. Furthermore, their pivot to new income sources through retraining and entrepreneurship reflects the principle of human capital investment and adaptability, which restores income and builds resilience after shocks. Establishing an emergency fund completed their turnaround, embedding financial discipline and ensuring preparedness for future crises.

The Owusus’ story exposes the dangers of lifestyle inflation and overleveraging. As income rose, so did their spending—much of it sustained through credit. This illusion of wealth masked fragile finances and pushed them into the debt trap, where high-interest loans consumed income and new borrowing merely serviced old debts.

Their turning point came through financial discipline and zero-based budgeting, a strategy that forced accountability by assigning every cedi a purpose. By cutting luxuries, downsizing their lifestyle, and prioritizing debt repayment, they redirected resources to essentials and savings. In the process, they embraced a redefined notion of wealth: true financial success lies not in visible consumption but in financial independence, security, and sustainable living within one’s means.

ECONOMIC IMPACT

Beyond personal lessons, these family stories reflect broader economic realities in Ghana and similar emerging markets.

• Inflation and Delayed Investment: The Dansos’ struggle with rising cement prices highlights how inflation erodes purchasing power and increases the cost of deferring investment. On a national scale, widespread delays in household projects due to inflation slow down construction demand and reduce multiplier effects in local economies.
• Income Shocks and Employment Shifts: The Mensahs’ crisis underscores the volatility of household income in economies dependent on wage employment and small businesses. Their pivot to new skills and entrepreneurship mirrors the structural shift toward self-employment and digital work, a trend increasingly shaping labor markets.
• Debt Culture and Consumption Pressure: The Owusus’ collapse reveals the economic risks of consumer credit expansion without parallel financial literacy. When families over-leverage, loan defaults rise, banks absorb higher risks, and community savings groups (like susu schemes) become destabilized, affecting wider financial stability.

Together, these cases show how family finance decisions ripple into the economy at large—affecting demand, savings rates, and even financial sector stability. Just as individual households must balance priorities, so too must economies find equilibrium between growth, stability, and resilience.

MOMENT OF CLARITY

For the Dansos, clarity emerged in the quiet tension of choosing between a daughter’s future and a retirement home. For the Mensahs, it came during a sudden collapse of both primary income sources, shaking their sense of security. And for the Owusus, it struck in public humiliation when debt collectors exposed the fragile foundation behind their glittering lifestyle. Though these moments looked different, they all revealed the same reality: financial decisions are not simply calculations of money in and money out, but reflections of deeper values—what to prioritize, what to sacrifice, and how to align today’s actions with tomorrow’s security.

In the end, all three families realized that true wealth is not measured by what is visible to outsiders—big houses, expensive schools, or flashy cars—but by what is quietly sustained within: resilience, adaptability, and balance. Peace of mind came not from chasing every dream at once, nor from trying to impress others, but from learning to live within their means, prepare for uncertainty, and invest in what truly lasts. Their collective clarity was this: financial peace is built not on appearances, but on the wisdom to choose balance over excess and resilience over illusion.

LESSONS FOR FAMILIES

• Every Decision Has Trade-offs – Families face competing needs: paying school fees, building homes, or maintaining appearances. Each choice comes with an opportunity cost. For instance, the Dansos had to weigh Adjoa’s education against their retirement house. Wise families learn to balance by prioritizing long-term benefits over short-term gratification.
• Inflation and Time Value Matter – Money loses value over time, so delaying investments or purchases often makes them more expensive later. The Owusus, for example, kept borrowing instead of investing early in assets. Acting quickly—whether buying land, investing in treasury bills, or paying fees—protects purchasing power and avoids future strain.
• Resilience Requires Adaptability – The Mensahs’ story showed how quickly stable income can vanish. Resilience comes from adaptability: retraining, starting small businesses, or diversifying income streams. Flexibility, not rigidity, helps families survive shocks.
• Discipline Beats Illusion – The Owusus chased social validation through luxury and debt, but it led to collapse. Discipline—through budgeting, controlled spending, and zero-based planning—builds true stability. Without moderation, even high incomes can evaporate.
• Emergency Buffers Are Essential – The Mensahs’ lack of savings worsened their crisis. A family emergency fund acts like a cushion: it doesn’t stop the fall, but it softens the landing. With 3–6 months of expenses saved, crises turn from disasters into manageable setbacks.
• Wealth Must Be Redefined – Families often equate wealth with visible symbols—cars, clothes, parties—but true wealth lies in independence and security. As the three families discovered, peace of mind comes not from what neighbors admire, but from knowing the family can pay fees, survive shocks, and retire comfortably.

DISCUSSION QUESTIONS

1. If you were the Dansos, would you spend more on Adjoa’s education or finish your retirement house? Why?
2. The Mensahs lost both income sources at once. What is more important for families—having many income streams or saving more for emergencies?
3. Why do some families, like the Owusus, spend on luxury and appearances even when their finances are weak? Is it personal choice or pressure from society?
4. Since inflation keeps raising costs, what can families do to protect their money—invest early, save differently, or buy assets sooner?
5. If you could create one golden rule for family finance to prevent mistakes like these, what would it be?

PREVIOUS CASE (EPISODE 6) DISCUSSION SOLUTIONS

1. From Jamila and Naa’s debate, what does the contrast between Islamic banking and traditional banking reveal about how risk and responsibility are distributed between banks and borrowers?

How risk is allocated

• Traditional banking (debt model): The bank lends capital and expects fixed periodic payments (principal + interest). The borrower bears most of the downside risk (business failure, price shocks). The bank’s risk is limited to credit/default risk and is managed by collateral, covenants, and credit scoring.
• Islamic banking (partnership/asset model): Financing is structured as trade, lease, equity participation or profit-sharing (Mudarabah, Musharakah, Ijarah, Murabaha). The bank and entrepreneur share profits and losses to varying degrees. The bank assumes greater exposure to underlying business performance and asset risk.

Practical consequences

• Incentives and monitoring: Risk-sharing aligns incentives — the bank has a direct interest in the project’s success and is more likely to provide non-financial support (market access, advice). In debt finance, borrowers may take on riskier projects because the upside accrues to them while downside remains on them (moral hazard can go either way).
• Financial stress and resilience: Under adverse shocks, borrowers with fixed-interest debt can face insolvency quickly; shared-loss arrangements can reduce bankruptcies but transfer credit/operational risk to banks.
• Behavioral outcomes: Borrowers may prefer risk-sharing when cashflows are volatile; creditors prefer predictable returns. Risk allocation shapes product design, eligibility, and pricing.

Key takeaway: The two models distribute risk differently — conventional banking concentrates downside on borrowers, while Islamic finance distributes risk between bank and client, changing incentives, monitoring needs, and resilience patterns.

2. How can Islamic banking principles (asset-backing and risk-sharing) contribute to financial stability in developing economies like Ghana?

Channels for stability and development

1. Reduced leverage and speculation: Asset-backed transactions require real collateral or underlying assets, discouraging pure financial speculation that creates asset bubbles. Fewer purely interest-driven leveraged positions lower systemic leverage.
2. Countercyclical cushioning: Profit-and-loss sharing (PLS) absorbs shocks: when business income falls banks share losses, reducing forced fire-sales and cascade defaults. This can dampen credit cycles in downturns.
3. Broader financial inclusion: Attracts populations excluded on religious grounds, mobilizing dormant savings into the formal system and deepening deposit pools. More depositors and diversified funding reduce concentration risk.
4. Real-sector orientation: Financing tied to productive assets channels capital into tangible projects (agriculture, manufacturing, infrastructure), supporting employment and real growth—less volatility from financial engineering.
5. Long-term infrastructure financing: Sukuk (asset-backed securities) provide long-tenor funding for public infrastructure without increasing conventional debt servicing pressures, supporting sustainable development.

Implementation safeguards

• Clear regulation and prudential buffers are needed to ensure banks can manage the investment risk they assume.
• Secondary markets and liquidity facilities (e.g., central bank Shariah-compliant repo windows) are important to handle asset illiquidity.

Key takeaway: By anchoring finance to real assets and sharing risk, Islamic finance can reduce speculation, deepen inclusion, and create more resilient credit flows—helpful for the stability of developing economies if supported by sound regulation and liquidity infrastructure.

3. What are the key challenges Islamic banks face in scaling up compared to traditional banks, and how might these challenges be addressed?

Key challenges

1. Product complexity & standardization: Multiple Shariah structures and local interpretations create inconsistent products and higher legal costs.
2. Liquidity management: Lack of deep secondary markets for Shariah-compliant instruments and fewer short-term Islamic liquidity tools make balance-sheet management harder.
3. Regulatory & accounting treatment: Existing prudential and accounting frameworks are tailored to interest-based models (e.g., treatment of profit shares vs interest), complicating risk measurement.
4. Human capital & expertise: Fewer professionals trained in Islamic finance structuring, Shariah governance, and risk management.
5. Perception & market reach: Seen as niche or faith-only product; limited awareness among non-Muslims; limited correspondent relationships internationally.

How to address them

1. Standardization: Develop national/regional model contracts and Shariah standards (industry associations, central bank / Shariah boards collaborate).
2. Liquidity infrastructure: Establish Shariah-compliant central bank facilities, create sukuk-based repo markets, and incentivize secondary trading of Sukuk to deepen liquidity.
3. Regulatory & accounting reforms: Adjust prudential rules to capture equity-like exposures; provide guidance on profit-sharing loss recognition; align with IFRS with carve-outs where necessary and issue clear regulatory guidance.
4. Capacity building: Invest in training programs for bankers, regulators, and Shariah scholars; partner with universities and international institutions for certifications.
5. Product innovation & outreach: Simplify retail products, create hybrid offerings for the mainstream market, run public-awareness campaigns to highlight competitiveness beyond religious appeal.

Key takeaway: Scaling requires coordinated policy action—standardizing products, building liquidity and markets, training talent, and modernizing regulation—so Islamic banks can compete at scale while preserving Shariah integrity.

4. How can both banking systems—Islamic and traditional—complement each other to expand financial inclusion and support entrepreneurship?

Complementary roles

1. Product diversity for different needs: Use Islamic products (Musharakah, Murabaha, Sukuk) for asset-backed, long-term, or faith-sensitive financing and conventional products for short-term working capital or where rapid, commoditized lending is needed.
2. Hybrid product design: Co-financing models where Islamic and conventional banks jointly fund projects (ring-fencing flows to meet Shariah requirements). Convertible or blended instruments that meet regulatory and Shariah constraints, expanding borrower choices.
3. Shared infrastructure: Common credit bureaus, KYC, mobile banking platforms, and fintech rails all banks use to reach underserved customers. Shared training and banking-as-a-service models to extend reach into rural/SME segments.
4. Risk distribution: Traditional banks provide liquidity and scale; Islamic banks bring real-asset discipline and access to previously untapped deposit bases. Pooling strengths can reduce financing costs and increase risk tolerance for SMEs.
5. Policy coordination: Regulators can create enabling frameworks that allow both systems to interoperate (e.g., tax neutrality for Sukuk vs bonds, clarity on collateral and insolvency hierarchy).

Concrete steps

• Pilot co-financing programs for SMEs where each bank funds a tranche consistent with its model.
• Central bank issues both conventional and Sukuk liquidity facilities to ensure interbank cooperation.
• Launch joint financial literacy campaigns to show entrepreneurs when to use which product.

Key takeaway: When designed to interoperate rather than compete, Islamic and traditional banking can widen access, tailor financing to business models, and leverage shared infrastructure to scale entrepreneurship.

5. If advising the Ghanaian government, how would you balance promoting traditional banking and Islamic banking to achieve national development goals?

Policy recommendations (practical, sequenced):

1. Adopt a level regulatory playing field: Ensure tax neutrality: avoid fiscal bias between Sukuk and conventional bonds (no double taxation). Clarify insolvency rules and collateral frameworks to include Shariah-compliant assets.
2. Enable market infrastructure: Support a Shariah-compliant liquidity facility (central bank window) and allow Sukuk issuance for public projects to build a benchmark curve. Encourage development of secondary markets and market-makers for Sukuk.
3. Standardize and certify: Sponsor an independent national Shariah advisory council to issue harmonized guidelines for Islamic financial products to reduce fragmentation. Promote adoption of international standards (AAOIFI, IFSB) adapted for Ghanaian context.
4. Stimulate demand through public procurement & pilot projects: Issue government Sukuk for infrastructure (roads, hospitals, housing) to demonstrate viability and attract institutional investors. Pilot co-financing schemes for agriculture and SMEs pairing Islamic and conventional banks.
5. Capacity building & public awareness: Invest in education and training for regulators, bankers, and legal professionals. Run financial literacy campaigns showing product choices and benefits to businesses and citizens.
6. Support fintech & innovation: Facilitate fintech sandboxes allowing Shariah-compliant digital products—mobile microfinance, invoice financing, and asset-tokenization for Sukuk.
7. Performance monitoring and phased scaling: Set KPIs (financial inclusion, SME credit growth, sukuk issuance volume) and review progress annually. Scale successful pilots and adjust regulation based on evidence.

Risks & mitigation

• Risk: Poorly designed risk-sharing products could transfer excessive risk to banks.
  Mitigation: Strong prudential limits, risk-based capital, and clear disclosure rules.
• Risk: Confusion among consumers about product differences.
  Mitigation: Mandatory disclosure templates and consumer education programs.

Key takeaway: A pragmatic government approach blends active facilitation (market infrastructure, Sukuk issuance, standardization) with light-handed regulation and capacity building—allowing both systems to coexist, compete, and cooperate toward national development goals.

The author is a Strategy, Leadership and Finance Enthusiast, an Mphil Finance graduate of the University of Ghana Business School, a member of the Institute of Chartered Accountants, Ghana and a part-time lecturer at the UGBS.

Email: [email protected]