> Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI

The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

A fitting final FI2020 blog post for me, focuses on my beloved country, Ghana. Hailed as one of sub-Saharan Africa’s shining stars and recently categorized by the World Bank as a lower middle income country, Ghana has been growing at a steady pace. GDP grew an impressive 15 percent in 2011 and 7.9 percent in 2012. Per capita income for all income quintiles is set to increase by approximately two-thirds by the year 2020. However, one question that plagues me, as I return home each year to new skyscrapers, apartment complexes and more gleaming cars, is how the financial needs of the up-and-coming middle and vulnerable income classes and people at the bottom of the pyramid are met. Currently, only 29 percent of Ghanaians have bank accounts, 37 percent have savings accounts, and 35 percent have access to credit.

Graciously, the Head of the Banking Department at the Bank of Ghana (BOG), with responsibility for formulation of policy for Financial Inclusion, Mrs. Elly Ohene-Adu, granted me an interview, to discuss the state of financial inclusion in Ghana:

Merene: What are Ghana’s goals for advancing financial inclusion in the next decade?

Elly Ohene-Adu: Ghana aims to be a cash-lite society in the near future. We are currently a very cash dependent society and you, Merene, can identify with stories of traders whose vehicles have been hijacked on major highways by robbers who have made away with large sums of money. It would be excellent to have a solid national electronic payments system to minimize such incidences and reduce transaction costs and time.

We also aim for quality, innovative financial services for our citizens. As the statistics above show, many Ghanaians have limited access to financial services. This inhibits the growth of the real sector. We would like to change that and give the financially excluded access to affordable finance tailored to their needs which will empower them to improve their economic livelihood.

Merene: What actions are prioritized to ensure that all Ghanaians have access to quality financial services?

Elly Ohene-Adu: We are working on a financial inclusion strategy and putting in place the right structures. Recently, in collaboration with Standard Chartered Bank and the Ghana Inter-Bank Payment and Settlement Systems, we held a National Payments Strategy workshop which brought together key stakeholders in the financial services and mobile telecommunications industries to chart an effective plan to transition our economy to a cash-lite one.

The Bank of Ghana is also formulating regulations to open up the banking sector to create room for informal financial services and mobile-based financial services. Current regulations stipulate that financial services be offered solely by banks and non-bank financial institutions supervised by the Bank of Ghana. One of our main focuses now is to facilitate the expansion of mobile financial services, with other innovations soon to follow. Mobile Network Operators (MNOs) have the platform and reach to open a myriad of accounts, especially for segments of the population that are hard-to-reach and/or not targeted by existing formal financial services providers.

Merene: Ghana has seen mobile phone subscription increase from 20 percent of the population in 2005 to 80 percent in 2010, pointing to a great market opportunity for the use of mobile money, yet only 1.5 percent of the population utilizes this service. Why so?

Elly Ohene-Adu: The low uptake of mobile financial services is both a supply and demand-side problem. On the supply side, there are issues with partnerships between MNOs offering this service and banks. Right from the introduction of mobile financial services in the country, MNOs have had to partner with banks. As I mentioned earlier, current regulation dictates that only BOG-supervised entities can offer financial services. This directive is justified from a consumer protection angle – allowing accounts to sit solely with an MNO implies that consumers would have contractual agreements with an institution that the central bank has no oversight over. Additionally, the existing regulation demands a many-to-many approach – MNOs offering mobile financial services must partner with more than one bank. The perception behind this was to have a system that would facilitate interoperability to the benefit of users of branchless banking products. This has however, proven to be rather cumbersome, as both banks and MNOs want to deal with each other exclusively. Moreover, most banks do not want to roll out a product that their competitors have access to; hence, investment in this space is low. Allowing banks and MNOs to have exclusivity will therefore create room for investment, result in less bureaucracy and quicker decision-making as well as greater returns on investment.

Another obstacle is the dearth of mobile banking agents. The rules governing the partnership between banks and MNOs require mobile money agents to be acquired and trained by the banks. Unfortunately, the onus, more often than not, has been laid on the MNOs. This results in increased operational costs for them, something they are not willing to incur, nor are they supposed to. As a result, we have fewer than the desired number of mobile banking agents in the country.

This issue ties into that of low uptake on the demand side – uptake of the financial products that are available goes hand-in-hand with agent acquisition. We need more trained agents to advertise and on-board mobile money customers, teaching them how to use the service and the immense benefit it holds for them.

Merene: What steps are being taken to remedy this situation?

Elly Ohene-Adu: At the BOG we have drafted and are reviewing new regulations to allow MNOs to create non-banking financial institutions. Chiefly, this means that an MNO’s financial services activity can be monitored by the BOG and that the MNO can have a partnership only with one bank as a clearing agent, making the issues arising from competition between the banks superfluous. Furthermore, MNOs will now be equipped to properly train and strategize the deployment of increased numbers of mobile banking agents.

Merene: What other channels are you exploring to make Ghana a cash-lite economy?

Elly Ohene-Adu: We recently limited third party over-the-counter check withdrawals to GH¢10,000 (approximately US$5,000) and hope to reduce it to GH¢5,000 (approximately US$2,500) by the beginning of next year. For example, if I owe you and pay you with a check of GH¢12,000 you cannot cash the check over the counter, you will need to pay the check into your own account.

Also on our horizon is the expansion of payment cards services and increase in numbers of ATMs and point of sale terminals. We are also looking to moving government payments like salaries, pensions, and allowances, onto electronic products, and a pilot is already in place where a small section of government workers are being paid on a biometric smart card called the e-zwich card. All in all, stakeholders are gradually coming on aboard, and the prospect for financial inclusion in Ghana is looking bright.

For more information on Financial Inclusion 2020, sign up for project updates.

Image credit: Stig Nygaard

Have you read?

Untapped Potential: Women and Mobile Money

CFI Publishes ‘Over-Indebtedness of Microborrowers in Ghana’ Report by Jessica Schicks

Innovations in Portability for the Developing World