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AFRACA REGIONAL WORKSHOP ON RURAL FINANCIAL INTERMEDIATION ACCRA, GHANA

AFRACA REGIONAL WORKSHOP ON RURAL FINANCIAL INTERMEDIATION ACCRA, GHANA. REGULATORY FRAMEWORK FOR FINANCIAL INCLUSION IN GHANA. Bank of Ghana . OUTLINE. INTRODUCTION WHAT IS FINANCIAL INCLUSION BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION

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AFRACA REGIONAL WORKSHOP ON RURAL FINANCIAL INTERMEDIATION ACCRA, GHANA

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  1. AFRACA REGIONAL WORKSHOP ON RURAL FINANCIAL INTERMEDIATION ACCRA, GHANA REGULATORY FRAMEWORK FOR FINANCIAL INCLUSION IN GHANA Bank of Ghana

  2. OUTLINE • INTRODUCTION • WHAT IS FINANCIAL INCLUSION • BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION • CHALLENGES IN REGULATION FOR FINANCIAL INCLUSION • BANK OF GHANA’S APPROACH • CONCLUSION Bank of Ghana

  3. INTRODUCTION • No debate about the need for financial inclusion. General agreement exists about the benefits of providing increased access to financial services. • Access to finance is critical for broad-based economic development and growth. Lack of access inhibits lives and limits the choices. • 2005 - UN declared as year of microfinance - to focus attention on innovative ways of providing and sustaining access to finance by countries and governments for the underserved segments of their populations. Bank of Ghana

  4. INTRODUCTION-cont. • The debate has been about how to achieve financial inclusion. The crux of that debate is: what policy frameworks support financial inclusion and how can access to financial services be broadened and deepened. • It is appropriate therefore that AFRACA has chosen the theme ‘Rural Financial Intermediation for Growth and Wealth Creation’, for this Regional workshop. Bank of Ghana

  5. WHAT IS FINANCIAL INCLUSION? • Encompasses the processes for providing opportunities for people to save, to access credit and to insure against relevant risks that they face. • Challenge is: Developing the appropriate institutions, products and services that ensures that people desiring these services are able to access them. • Access means more than availability; services and products should be cost effective, timely and appropriate. • Regulatory policy has a critical role to play in enhancing access to financial services. Bank of Ghana

  6. BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION - 1 • BOG has responsibility for fashioning regulatory policy aimed at ensuring the safety, soundness and stability of the banking and financial system. • This role includes licensing and supervising an appropriate mix of institutions to ensure financial service provision to all segments of the population. • Ghana boasts of a well diversified financial system, which now comprises: • BOG and the 26 universal banks • The ARB Apex Bank and the system of rural and community banks (RCBs) – Apex Bank and 136 RCBs. • Deposit taking non-bank financial institutions – savings and loans companies (19), finance houses (21) • Non-deposit taking financial institutions – leasing and mortgage companies (7) • Credit Reference Bureau (1) Bank of Ghana

  7. BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION -2 • These institutions are governed by clear legal and regulatory framework – The Banking Act, 2004 as amended by the Banking (Amendment) Act 2007 and the Non-bank Financial Institutions Act, 2008, ARB Apex Bank Regulations, LI 1825 • RCBs and Savings and Loan Companies have been the key formal institutions for delivering financial services to the poor and the marginalized. • Some commercial banks have also set up microfinance departments/SME units to deliver banking and credit services to small and micro-credit customers. Bank of Ghana

  8. BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION - 3 • BOG is supporting the harnessing of ICT to deliver financial services through a number of ways: • The establishment of GhIPSS -the e-zwich payments platform and smart card – involving the use of biometric smart card technology to facilitate savings and payments for the unbanked and underbanked – applications to cocoa farmers, salary customers, student remittances, etc • The introduction of branchless banking which allows banks to partner telecom companies to deliver mobile money services. MTN mobile money and Zain zap already operating –payment facilitation. • Objective is to increase access across a variety of platforms. Bank of Ghana

  9. BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION - 4 • An unregulated microfinance sector has emerged and is growing in numbers and size and posing challenges to safety and soundness. • FNGOs estimated at about 50 countrywide • Money lenders are over 200 • Available data (2009) on susu operations indicates a membership of over 1500 (including companies) with over GH¢44 million in savings (about USD 31 million). • Mini savings and loans companies ?? Bank of Ghana

  10. CHALLENGES IN REGULATION FOR FINANCIAL INCLUSION - 1 • For formal sector institutions such as banks, RCBs, S&Ls, - cost in terms of human and financial resources. BOG has borne this up to now. Issue is should regulated institutions be charged? Fully? Partially? – Implications! • Expanding the perimeter of regulation to: • Microfinance institutions, • Money lenders, • Susu companies and Susu collectors – while critical for expanding access to the poor in rural areas and or the urban peripheries, costly to supervise. Bank of Ghana

  11. CHALLENGES IN REGULATION FOR FINANCIAL INCLUSION - 2 • This group of institutions present a different set of challenges to regulation and supervision such as: • What level of regulation is appropriate? • How can regulation be made cost-effective? • How can regulation be achieved without stifling innovation? • How do we ensure integrity in financial services, especially microfinance? • Credit Reporting Act, Borrowers and Lenders Act. – can these help? Bank of Ghana

  12. BANK OF GHANA’S APPROACH - 1 • BOG believes that appropriate regulation and supervision is necessary to achieve safety and soundness as well as protection for depositors and creditors. • In that regard, deposit taking institutions require closer supervision than non-deposit taking institutions. • Regulation and supervision has taken the form of: • Licensing of institutions • Setting minimum capital requirements • Requiring periodic prudential reporting • On-site visits • Installation of risk management systems Bank of Ghana

  13. BANK OF GHANA’S APPROACH - 2 • Expansion of the perimeter of regulation and supervision • To bring in hitherto unsupervised institutions – Susu companies, money lenders, microfinance institutions. • Possibility of creating lower tiers of institutions below S&Ls and FHs. • Establish licensing criteria for such institutions, including minimum capital requirements as appropriate, prudential reporting, limits on operational areas, branching, etc. • Require membership of a trade association with jointly approved operating guidelines – element of self-regulation. Bank of Ghana

  14. CONCLUSION • Financial inclusion is essential for poverty reduction and wealth creation • Regulatory policy can contribute by: • engendering a safe and sound financial system; • supporting the creation and development of appropriate institutions, products and services for meeting the needs of the poor and excluded; • encouraging the harnessing of technology to deliver cost-effective financial services; and • balancing the need for regulation with the risks posed to the financial sector. Bank of Ghana

  15. T H A N K Y O U Bank of Ghana

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