How Can Foreign Remittance Companies Partner With Local Fintech Startups In Ghana, Without Physical Presence?

Governor of the Bank of Ghana, Dr Ernest Addison

Foreign remittance companies desiring to partner with fintech startups in Ghana will derive their motivation from the fact that West Africa — especially Nigeria and Ghana — is the hotbed of international remittances in Africa. In 2019, before the coronavirus shawled the world, Nigeria was Africa’s largest recipient of remittance flows with $23.8 billion followed by Ghana ($3.5 billion), with Kenya receiving $2.8 billion, even though Ghana is the 14th most populated country in Africa, behind countries like Egypt, South Africa, etc.

However, while it may be difficult to explore the Nigerian remittance market as a foreign fintech company — given the country’s central bank’s recent policies against international remittance platforms — it is relatively easier to launch presence in Ghana as a foreign remittance company.

Governor of the Bank of Ghana, Dr Ernest Addison
Governor of the Bank of Ghana, Dr Ernest Addison

 Zeepay, one of Ghana’s money transfer services recently announced a partnership with Transfast, a Mastercard company and cross-border payments service provider. The partnership will enable consumers around the world to send money directly to more than 20 million mobile money wallets in Ghana.

Here Is What You Need To Know

Partnering With Local Fintechs 

Currently, according to Bank of Ghana’s rules on foreign remittances, the only way foreign money transfer companies can partner with local fintechs in Ghana for remittance services without establishing any physical presence is by partnering with either of the two types of fintech license holders:

 1) Dedicated Electronic Money Issuers (DEMIs); and

2) Enhanced Payment Service Providers (EPSPs). 

A Dedicated Electronic Money Issuers (DEMI) in Ghana is an fintech company licensed under Section 24 of Ghana’s Payment Systems and Services Act of 2019. Generally, a DEMI exists to offer electronic money services. The license is relatively new in the country with Zeepay picking up the first ever DEMI license just recently in 2020. As of now, only about 5 fintech companies have the license in Ghana —that is, apart from Zeepay, Airtel Mobile, Vodafone Mobile, others are GCB G-Money and Yup Ghana Limited. 

On the other hand, an Enhanced Payment Service Provider license offers a wider range of benefits, including but not limited to ability to support provision of services including electronic funds transfer, facilitation of interoperability of payment systems and services. It also allows a company to embark on the provision of services such as supporting the payment system aggregation, provision of electronic platforms for payment or receipt of funds, and the provision of technological services to facilitate switching, routing, clearing and data management. The Bank of Ghana, also, most recently released a list of 18 approved Enhanced Payment Service Providers, although the country’s first ever payment service provider license was given to Nsano Limited only in May 2020. 

The implication of the above is that partnerships with local fintechs are relatively at their early stages in the west African country. 

fintechs foreign partner Ghana

What Must A Foreign Fintech Company Do To Establish Partnership With A Local Fintech? 

Generally, there is no limit to the number of foreign fintech companies a local fintech company can partner with, but for every of such partnerships to be approved by the Bank of Ghana, the following conditions must be met:

  • The foreign fintech company must have been in existence for not less than three years and must have been licensed by its country of registration to carry out international money transfer services. In other words, the company must be well established in the business of money transfer, especially in terms of volume and value of transactions, number of countries of operation as well as number of customers served. 
  • The foreign company must enter into a formal partnership agreement with the local fintech company. This is usually done by signing a Service Level Agreement (SLA) with the local company. The SLA must thoroughly detail all the services to be provided under the agreement. 
  • The foreign fintech company must also submit notarised declarations that its directors have not been directly concerned in the management of any licensed institutions, the license of which has been revoked. 
  • The foregin fintech company must also submit notarised declarations that its directors or shareholders have not been indicted for offences related to illegal conduct, inappropriate business practices, financial loss due to dishonesty, incompetence, malpractice, or involved in business practices which are deceitful, oppressive or otherwise improper (whether unlawful or not).
  • The foreign fintech company must not come from a country which does not implement and enforce Anti-Money Laundering /Combating the Financing of Terrorism frameworks in line with Financial Action Task Force (FATF) recommendations and which must not have come under adverse findings from mutual evaluation report or cited for AML/CFT infringement.
  • The foreign fintech company must also provide evidence of adequate data protection policies in place as well as evidence of compliance with international best practices. In this regard, a data protection certificate may serve.

How Long Does It Take To Get Regulatory Approval For Such Partnerships?

According to the Bank of Ghana, it takes ninety (90) days — following receipt of a complete application or where further information has been required, after receipt of the information — to grant or refuse the partnership. The country’s Head of the FinTech and Innovation Office of the Bank of Ghana approves or refuses the approval of such partnerships. 

For more on what is required of a partner local fintech company before the partnership can be approved, click here

InstitutionLicence Type
Airtel Mobile Commerce (Ghana) LimitedDedicated Electronic Money Issuer
GCB G-MoneyDedicated Electronic Money Issuer
Yup Ghana LimitedDedicated Electronic Money Issuer
Vodafone Mobile Financial Services LimitedDedicated Electronic Money Issuer
Zeepay Ghana LimitedDedicated Electronic Money Issuer
AppsNmobile Solutions LimitedPayment Service Provider Enhanced
Bsystems LimitedPayment Service Provider Enhanced
Cellulant Ghana LimitedPayment Service Provider Enhanced
Dreamoval LimitedPayment Service Provider Enhanced
Emergent Payments Ghana LimitedPayment Service Provider Enhanced
Etranzact LimitedPayment Service Provider Enhanced
ExpressPay Ghana LimitedPayment Service Provider Enhanced
Fast Pace Transfer LimitedPayment Service Provider Enhanced
Global Accelerex Ghana LtdPayment Service Provider Enhanced
Halges Financial Technologies LimitedPayment Service Provider Enhanced
Hubtel LimitedPayment Service Provider Enhanced
IT Consortium LimitedPayment Service Provider Enhanced
MFS Ghana LimitedPayment Service Provider Enhanced
Moolre LimitedPayment Service Provider Enhanced
Nfortics Ghana LimitedPayment Service Provider Enhanced
Nsano LimitedPayment Service Provider Enhanced
PaySwitch Ghana LimitedPayment Service Provider Enhanced
Transsnet Payments Ghana LimitedPayment Service Provider Enhanced
Techfin Innovations LtdPayment Service Provider Medium
ZappGhana LimitedPayment Service Provider Medium
Titan Payment SystemsPayment Service Provider Standard
List Of Approved Electronic Money Issuers And Payment Service Providers In Ghana as at 1st April, 2021.

fintech foreign partner Ghana fintech foreign partner Ghana fintech foreign partner Ghana

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Dormant Accounts Cannot Be Wired Into Govt. Treasury Under Bank of Ghana’s New Rules

Governor, bank of Ghana, Dr Ernest Addison

Ghana seems to be countering all recent controversial policies made by its west African neighbour, Nigeria. After giving a badge of approval on blockchain companies, and introducing a more progressive approach towards regulating crowdfunding, the bank has now rolled out a new policy on dormant accounts, aimed at protecting abandoned funds at Ghanaian banks. According to the bank, any account at a Ghanaian bank with no customer activity for a period of two years is a dormant account — three years for a fixed deposit account. After the respective periods of time, banks are then mandated to transfer all the dormant accounts to a register of dormant accounts to be kept by the banks. 

Governor, bank of Ghana, Dr Ernest Addison
Governor, bank of Ghana, Dr Ernest Addison

“An account transferred to the register of dormant account shall not attract any service charge or account related fees. Interest bearing accounts transferred to the dormant account register shall also cease to accrue any interest,” the bank said in the new rules.

What Is Interesting About The New Policy? 

One interesting arm of the new rules is that Bank of Ghana has instructed banks in Ghana to take adequate steps to contact an account holder at least three (3) months before the account becomes dormant. Those to be contacted include “ Next of Kin” of the customers. 

Again, banks are mandated to publish in national newspapers, including digital print media, a list of all the accounts that have been on the register of dormant accounts for three years. 

Where the account holder still fails to claim the funds in the dormant account, banks are then requested to transfer the dormant funds to Bank of Ghana. However, the funds can still be claimed back by the account holders or beneficiaries from the Bank of Ghana even after they have been lodged with the apex bank. 

In any case, for all the time during which account remains dormant, Bank of Ghana says the funds in them are still covered by the Ghana Deposit Protection Scheme, a form of insurance protecting customers’ funds at licensed banks in Ghana. 

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Nigeria Borrows From Dormant and Unclaimed Dividends Accounts

Bank of Ghana’s latest move comes on the heels of Nigeria’s Finance Act 2020, which allows Nigeria’s federal government, through its Debt Management Office (DMO), to move all such funds to a trust to be run by the office. Government can then borrow from the trust. 

“If you have bank balances and unclaimed dividends that are not six years and above, this has no implication on you.

“If you have unclaimed dividends in a company, that is not a public limited one listed on the Nigerian Stock Exchange, you have no issue. If you do, you can start the process of taking back your unclaimed dividends and if it is a bank balance, go and get your bank balances.

“All these will be done in consultation with the bankers’ committee, CBN and the banks for the unclaimed bank balances and unclaimed dividends, registrars, Securities and Exchange Commission, other regulatory bodies,” said Bode Oyetunde, Senior Special Assistant to Nigerian President on Finance and Fiscal Matters and Secretary of the committee.

The total amount of the unclaimed funds at Nigerian banks and custodians has been put at more than 180 billion naira ($472 million). 

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Bank of Ghana dormant accounts Bank of Ghana dormant accounts

Ghana’s New Regulatory Sandbox Regime Favours Blockchain Startups Ahead Of Others

Dr. Ernest Addison, governor, central bank of Ghana

Bank of Ghana is not toeing the path of Nigeria’s central bank. Although both banks have been keeping up with the explosion in innovations, the former is taking on a more progressive approach. To that effect, the highest bank in Ghana has done the unforeseen: encouraging previously unregulated financial technology companies, especially blockchain, remittance and crowdfunding products and services, to come forward and be issued licenses under a new regulatory and innovation sandbox pilot, which it is spearheading in collaboration with EMTECH Service LLC. 

Governor of the Bank of Ghana, Dr. Ernest Addison
Governor of the Bank of Ghana, Dr. Ernest Addison

“This is in line with its commitment to evolve an enabling and inclusive regulatory environment that promotes FinTechs and supports innovation,” the bank said. 

“Within the financial sector, a regulatory and innovation sandbox is a supportive and controlled policy environment that enables firms to test innovative products, services and business models under the supervision of a regulator. Effectively, the regulatory and innovation sandbox will provide a forum for financial sector innovators to interact with the sector regulator to test digital financial service innovations while evolving enabling regulatory environment,” it noted.

Who Can Apply For The License? 

The new licensing regime will be available to: 

  • To banks, specialised deposit-taking institutions and payment service providers including dedicated electronic money issuers.
  • Unregulated entities and persons that have innovations that meet the sandbox requirements.

However, the entities above still need to show that: 

  • Their digital business models are new and are not currently covered explicitly or implicitly under any regulation in Ghana.
  • Their digital financial service technology is still new and immature; and
  • Their Innovative digital financial services products have the potential of to address a persistent financial inclusion challenge. 

“Within the broad categories outlined, the Bank of Ghana would give preference to products and services leveraging blockchain technology, remittance products, crowdfunding products and services, e-KYC (electronic know your customer) platforms, RegTech (regulatory technology), SupTech (supervisory technology), digital banking, products and services targeting women financial inclusion and innovative merchant payment solutions for micro, small and medium size enterprises (MSMEs),” the bank said.

In simple terms, this is how a regulatory sandbox works. Image Credits: LinkedIn

What Is The Purpose Of The Regulatory Sandbox Regime?

With the new regulatory sandbox license, Bank of Ghana seeks to:

  • Reduce time-to-market for unregulated products; 
  • Allow regulators to learn about innovations faster;
  • Encourage innovators to formalize their business and incentivise incumbents to experiment with new ideas;
  • Reduce the cost of innovation for innovators; and 
  • Provide valuable insight for regulators to evolve effective regulations.

Read also: Nigerian Central Bank Finally Releases Rules For Sandbox Operations. Here’s What Fintech Startups Should Know

Bank of Ghana’s latest move comes on the heels of the recent blocks placed by Nigeria’s central bank on cryptocurrency trading and the facilitation of international remittances by startup companies. Apart from Mauritius and Nigeria, Tunisia is has more recently launched a regulatory sandbox regime. 

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Bank of Ghana Moves To Regulate Investment-Based Crowdfunding In New Policy. What Startups Should Know

There is no express regulation on investment-based crowdfunding, otherwise known as equity crowdfunding, “susu”, “nnoboa” or “ntoboa” in Ghana, but Bank of Ghana (BoG), the country’s apex bank, is leading a campaign to change that. In a new policy document, the bank has not only expressly given a go ahead order for the operation of donation or reward-based crowdfunding, but it has, for the first time, spoken about the legality or the illegality of engaging in crowdfunding operations in the west African country.

Bank of Ghana

“With the introduction of mobile money, associations and corporate entities have found crowdfunding to be an efficient channel for collecting donations and for raising funds. Mobile money platforms have been used to raise funds for old student association contributions, development contributions, funeral donations and donations towards medical expenses of vulnerable persons,” the bank stated in its latest document. 

Read also:Tata Ghana Wins John Deere Africa Dealer of the Year Award 2020

“This development signals the potential of digital platforms in transforming the traditional crowdfunding model to enhance its contribution to the implementation of the National Financial Inclusion Strategy and the Digital Financial Services Policy objectives of the country,” it added. 

In Simple Terms, What Does The New Policy Say? 

BoG’s latest document establishes the following certainties about crowdfunding in Ghana:

  • That Bank of Ghana has the power under Ghanaian laws to regulate crowdfunding of any type. The bank quoted certain laws in Ghana that make this possible. These include: the Payment Systems and Services Act 2019 (Act 987); the Data Protection Act 2012 (Act 843); Banks and Specialised Deposit Taking Institutions Act, 2016 (Act 930); the Securities Industry Act, 2016 (Act 929); and the Cybersecurity Act 2020.
  • That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding (that is, let the public come invest in my company and they will get shares) platforms will be regulated, but not yet regulated by the Bank of Ghana — since they deal with securities and loans and leverage payment platforms for the collection and disbursement of funds.
  • That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding, by their nature, fall within both the regulatory jurisdiction of the Bank of Ghana and Ghana’s Securities and Exchange Commission (SEC). And so, Bank of Ghana will work with SEC, which is currently putting together a set of crowdfunding regulations, to prevent possible regulatory lapses with regard to both types of crowdfunding. 
  • That Bank of Ghana does not need to issue further regulations on any crowdfunding, which has to do with donation or giving back non-financial rewards to investors, as the bank’s policies currently support and encourage anyone wishing to do so to go ahead. 
  • To be clear, Bank of Ghana goes ahead to state what it means exactly by donation or reward-based crowdfunding. The Bank says the two models — that is, donation and reward-based — involve the collection, holding and disbursement of funds. 
  • The bank therefore says that its current policy permits Ghanaian banks — such as, Specialised Deposit-Taking Institutions (SDIs), Dedicated Electronic Money Issuers (DEMIs) and Enhanced Payment Service Providers (EPSPs) — to allow anybody wishing to run these types of crowdfunding campaign to do so. 
  • It says, however, that if the donation or reward-based crowdfunding is run through a Dedicated Electronic Money Issuer (DEMIs) — such as ZeePay currently does — then merchant wallets must be created and dedicated to the collection of donations.
  • For startups that hold the EPSP license — such as PalmPay — they would need to partner with a bank to fully deliver the service since they do not issue electronic wallets or accounts to their customers.
  • The Bank also goes ahead to demand that Ghanaian banks which host crowdfunding platforms must go ahead to conduct due diligence in accordance with BoG’s NOTICE NO. BG/GOV/SEC/2020/15 dated 3rd December 2020. 

In Summary, What Does The New Policy Imply?

The implications of Bank of Ghana’s latest policy are fivefold:

  • First, the policy implies that Ghanaian banks are only authorised to host companies that run donation or reward-based crowdfunding, pending when the BOG and SEC issue out regulations on equity or investment-based crowdfunding. This implication presents a big loophole as a smart startup running a crowdfunding campaign may call it donation while it is investment-based. 
  • Second, BoG did not expressly prohibit equity crowdfunding, but discourages Ghanaian banks from hosting equity crowdfunding platforms. 
  • Third, the policy implies that only crowdfunding companies expressly hosted by Ghanaian banks are legal. Therefore, the policy did not catch foreign-based crowdfunding firms targeting Ghanaian investors, thereby leaving investors to their fate. 
  • Fourth, in the case of the disappearance of investors with the funds raised from crowdfunding platforms, the policy implies that BoG may go after those investors’ accounts to recover the funds. 
  • Fifth, the new policy implies that BoG wants to monitor funds flowing through crowdfunding platforms. Thus, from now on, banks are expected to designate bank accounts associated with crowdfunding, appropriately. 

Last year, Ghana’s Securities and Exchange Commission (SEC) said it plans to introduce a framework for the commencement of crowdfunding services by 2021 and hopes to have a system up and running, backed by the requisite legislation. Emmanuel Ashong- Katai, the SEC’s head of policy, research and IT, said the framework being designed by the SEC aims to ensure that investors are protected from fraudulent entrepreneurs

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Bank of Ghana Introduces real-time platform for Interbank Forex Trading

Governor of the Bank of Ghana, Dr Ernest Addison

As part of efforts aimed at strengthening the stability of its currency, the cedi, the central bank of Ghana known as Bank of Ghana (BoG) has launched a platform for commercial banks to use in the trading of forex in a real-time manner. Bank sources say that the move is part of its plans to ensure the continued stability of the local currency against its major trading partners. Known as the Refinitiv Matching Platform, analysts say that the apex bank wants to use a transparent trading system to create stable pricing for the local currency.

Governor of the Bank of Ghana, Dr Ernest Addison
Governor of the Bank of Ghana, Dr Ernest Addison

Speaking on the development, the Governor of the Bank of Ghana, Dr Ernest Addison said that the launch of the platform is an addition to the number of measures the bank has undertaken to fulfill its mandate of ensuring a stable local currency. “The adoption of this platform is key to deepening the local FX market, and we, therefore, expect full adoption from every bank. I expect this platform to play an effective role in further transforming the interbank market into a deeper, liquid and more efficient one which would, in turn, support the central bank’s mandate of price and financial stability,” Dr Addison stated.

Read also:Ghana Sets Up Committee Over Nigerian Businesses in the Country

He further stated that in the future, other major stakeholders in the country’s foreign exchange market such as the Bulk Oil Distribution Companies, mining firms and others, would be granted access to the platform, so they can see in real-time the trading position of the cedi against the other currencies.

Read also:Foreign Investors Scramble for Ghana’s Eurobond in the International Market

Explaining how Refinitiv Match Platform works, the Head of Financial Markets at the Bank of Ghana, Steve Opata, said that the Refinitiv Match Platform allows banks to trade a minimum lot of $250,000 with settlement done instantly as against the previous system where settlement is done over the counter. The platform comes at a time the local currency has appreciated by about 3 percent against the US dollar since the start of the year.

 

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

How Bank of Ghana Won the Central Bank of the Year 2020

Dr. Ernest Addison, governor, central bank of Ghana

The Bank of Ghana has been adjudged the best central bank in the world by winning The Central Bank of the Year 2020 Award. This was made known today by Central Banking, the world’s leading financial information journal that monitors development in central banks across 120 countries with cutting edge solutions through training and research. The Bank of Ghana was adjudged the most improved because of the depth and extent of the reforms it carried out during the period under review.  Before now, close watchers of monetary policy developments in Africa have identified the extensive reforms being carried out by the Bank of Ghana since

Dr. Ernest Addison, governor, central bank of Ghana
Dr. Ernest Addison, governor, central bank of Ghana

was appointed as governor as responsible for the positive impact the apex bank has made across board.

 

The Bank took a very bold step in 2017 with the coming on board of Dr. Addison with the asset quality review of the country’s banks. The review observers noted, found that many of Ghana’s lenders were deeply unstable. “In short, the financial system had reached a tipping point, and we could not just have assumed business as usual,” Addison told Central Banking in 2018. The central bank soon closed two lenders, but that was only the start of its activity. Elsie Addo Awadzi, one of the Bank of Ghana’s deputy governors, recently said the review found that many lenders had “passed the stage where you could use supervisory tools to try to make them recover”.

Read also : Reappraising Gains of Ghana’s ‘Year of Return’ Campaign

At the start of Addison’s tenure, there were 35 commercial banks operating in Ghana. But by January 2018, less than two years into his tenure as governor, there were only 23. Some banks were merged, while others had had their licences withdrawn. The central bank also took radical action in the microfinance sector, shutting down several hundred small lenders. These moves marked a sharp break with previous policy. In a December 2018 speech, Addison strongly criticised the actions of previous central bank governors: “Our predecessors continued to provide liquidity support to these weak failing banks, without addressing the underlying problems that led to the illiquidity and insolvency of these institutions.”

This policy, he made plain, was now over. The central bank began a reform programme that has lasted several years, and has won praise from institutions such as the International Monetary Fund. The mechanics of this were often difficult. The central bank often found itself having to resolve several banks simultaneously. This greatly increased the demands on its supervisory staff as they worked on creating legally defensible and operationally feasible plans to take over banks. The central bank began a reform programme that has lasted several years, and has won praise from institutions such as the IMF The central bank announced on several occasions that it had found serious faults in the way the banks were managed.

Read also : Ghanaian, Nigerian Startups Secure $50k Funding After Village Capital Agriculture Accelerator

 In August 2018, Addison said several of the management teams in Ghana’s banks had obtained banking licences through “false pretences”. Others had removed very large sums of money from the banks they owned, he said. Deputy Governor Awadzi said the central bank had to assemble teams of new managers, backed by security experts, who would take over failing banks at very short notice. “For some things, you had to wait until the last minute because you didn’t want the word out there,” she told Central Banking. The central bank did not just respond to emergencies in individual banks, but reformed standards for the whole sector. In June 2018, it issued a capital requirements directive for the country’s banks. It has the power to increase capital for any lender that it judges is not meeting risk management standards. Addison chairs Ghana’s Financial Stability Council, the body created by President Akufo-Addo in 2019 to co-ordinate the efforts of the country’s regulatory bodies. In September 2019, the Institute of Chartered Accountants (Ghana) fined a number of accounting firms, including Deloitte, for their role in failing to adequately audit of some of the country’s banks.

While the standout feature for the Bank of Ghana during the last three years has been reforming the country’s banking sector, its performance in other fields has also impressed some outside observers. Addison’s predecessors faced the problem that the previous Ghanaian government had been resorting to monetary financing. International donors helped to push the government away from this device. Under Addison’s predecessor but one, Henry Kofi Wampah, the Bank of Ghana had hiked policy rates in order to deal with rapidly rising inflation. Tighter monetary policy, almost certainly reinforced by the reforms of the government’s fiscal approach, meant that the most recent bout of runaway annual inflation peaked in 2016.

Read also : US and Ghana Settle Visa Restrictions Issue

The Bank of Ghana’s Monetary Policy Committee, which consists of seven members – five from the central bank and two external members appointed by the minister of finance – subsequently, has been able to cut policy rates in response, with the IMF describing its stance as appropriate. The inflation rate in Ghana as measured by the consumer price index, stood at 7.9% in December. This was almost at the centre of central bank’s price stability mandate, defined as a medium-term inflation target of 8% with a band of ±2 percentage points. Consumer price index (CPI) inflation has hit highs of close to 19% in 2016.

“Ghana’s macroeconomic outlook remains favourable, supported by strong activity in the extractive industry and a safer banking system. Real GDP growth is projected at around 7% in 2019. September consumer price inflation, at 7.6% in the rebased CPI series, is just below the 8% target,” says Carlo Sdralevich, Western III division chief at the IMF, in the fund’s most recent Article IV review, in October 2019. “The cedi has depreciated by about 10% from the beginning of 2019. The central bank’s international reserves are projected to record a buildup in 2019, supported mainly by an improving trade balance and external borrowing.” Sdralevich says the Bank of Ghana’s monetary policy stance appears appropriate, “but it should continue to remain vigilant to inflationary risks”, with tightening being a possibility, should “inflationary or exchange rate pressures emerge”: “The central bank’s focus on building external buffers going into 2020 is a welcome development.”

The Bank of Ghana has also done an effective job of managing the country’s physical currency. It successfully introduced two new banknote denominations in November, for 100 and 200 cedis ($17.9 and $35.7 respectively). At the same time, it replaced the 2 cedi banknote with a coin. The new higher-denomination notes were offered as inflation had eroded the value of the currency since four ‘zeros’ were removed from the currency in 1997. The new notes also offer enhanced security features aimed at discouraging counterfeiters. They are also expected to last longer and be more easily read by machines. The central bank’s five-year strategy for improving payments, published in 2019 and building on a previous plan, puts great emphasis on fostering the growth of electronic means of payments and increasing financial inclusion. One key aim is to broaden the type of institutions that can offer payment services. This kind of initiative has brought excellent results in other African countries, where the entry of telecoms companies to the payments market has vastly expanded access to banking services.

The central bank wants to make it possible to use QR codes to carry out transactions. It also plans to have a regulatory sandbox in place for fintech companies by the end of 2020. In October 2018, the central bank created a cyber security centre to aid the banking sector in dealing with this evolving risk. In December 2019, the Bank of Ghana also published a set of principles aimed at encouraging environmentally sustainable and socially responsible practices by the country’s banks. It was one of the first central banks in a developing economy to make such a move. The central bank has also made considerable improvements to its website. This includes a more user-friendly interface and responsive web pages.

The Bank of Ghana still faces challenges on multiple fronts. It must ensure the recapitalisation of some of the banks that were put into resolution. The banking sector also has to digest a large proportion of non-performing loans, and IMF officials have called for closer regulation of the country’s non-bank finance sector. But the performance of the central bank during the past three years indicates the institution is well placed to meet such challenges. The Bank of Ghana has an impressive record of achievement, but the most notable is its reform of a seriously undercapitalised and poorly managed banking sector. The central bank has dealt with this complex set of risks, which could have caused serious damage to the country’s economy.

Ernest Addison who was nominated for the position of governor, Bank of Ghana by President Nana Akufo-Addo holds a PhD in economics from Canada’s McGill University. Before his nomination, he was previously the lead regional economist at the African Development Bank (AfDB) where he accumulated considerable experience, having also served as the director of research at the Bank of Ghana from 2003 to 2011, after a year as the chief economist of the West African Monetary Institute. His appointment led to one of the most notable performances by any central bank over the last decade.

 

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry