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ECONOMY OF GHANA II

THE FINANCIAL SECTOR IN GHANA


ECON 216_Economy of Ghana 2 Lecture Material by Dr. Emmanuel Codjoe 2


•More broadly, the financial sector consists of a variety of formal and informal financial institutions, with various levels of interconnectedness, performing the fundamental function of intermediation.



•Basically, the financial sector as constituted plays a fundamental role in ensuring the smooth functioning of the economy.

•Well functioning financial sectors do very well in selecting the most productive recipients of financial resources, whilst ensuring that these are used in activities that generate high returns.


THE FINANCIAL SECTOR IN GHANA•Thus, the breakdown of the financial system has a devastating effect on the effective functioning of the economy, with the result that economic outcomes become extremely poor.

• In other words, the financial sector is an indispensable sector to the functioning of any modern economy.



•The financial system provided five key services:1) Savings facilities2) Credit allocation and monitoring of

borrowers3) Payments4) Risk mitigation5) Liquidity services

ECON 216_Economy of Ghana 2 Lecture Material by Dr. Emmanuel Codjoe

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•Savings facilities: The financial sector provides saving facilities and mobilized financial resources from households and firms.•Credit allocation: this is closely related to the saving function. The provision of credit is important to effective functioning of the economy.



•Payments: an important function of financial systems in market economies is to offer fast and secure means of transferring funds and making payments for goods and services. Usually, there are several instruments for making payments, such as, cash, cheques, payment orders, wire transfers, debit and credit cards.



•Risk mitigation: the risk mitigation services offered by the financial system include insurance (life and non-life) and derivative markets.

•Liquidity Services: this is reflected in maturity transformation and secondary market arrangements.



•Liquidity Services: most high-return projects require a long-term commitment of capital. However, savers are often reluctant to give up their savings for long periods of time. The role of the financial system is to transform liquid, short-term savings into relatively illiquid, long-term investments, thus promoting capital accumulation.



•Sectoral Indicators of Financial Development

Banking • Total number of banks• Number of branches and outlets• Number of branches/thousand

population• Bank deposits/GDP (%)• Bank assets/total financial assets (%)• Bank assets/GDP (%)




Insurance • Number of insurance companies• Gross premiums/GDP (%)• Gross life premiums/GDP (%)• Gross non-life premiums/GDP (%)




Pensions • Types of pension plans• Percentage of labour force

covered by pensions• Pension fund assets/GDP (%)• Pension fund assets/total

financial assets (%)




Mortgage • Mortgage assets/total financial assets (%)

• Mortgage debt stock/GDP (%)

Leasing • Leased assets/total domestic investment




Money Markets

• Types and value of money market instruments

• New issues and growth in outstanding value

• Number and value of daily (weekly) transactions in instruments


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Foreign Exchange Markets

• Volume and value of daily foreign exchange transactions

• Adequacy of foreign exchange (reserves in months of import, as ratio to short-term external debt or to broad money)




Capital Markets

• Number of listed securities (bonds and equities)

• Share of households, corporations, banks, and NBFIs, in the holding of securities

• Number and value of new issues (bonds and equities)


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Capital Markets

• Market capitalization/GDP (%)• Value trade/market capitalization (%)• Size of derivative markets




Collective Investment Funds

• Types and number of schemes (unique and mixed funds)

• Total assets and growth rates (nominal and as percentage of GDP)

• Total number of investors and average balance per investor




Collective Investment Funds

• Share of households, corporations, banks, and NBFIs, in total mutual fund assets


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THE FINANCIAL SECTOR IN GHANA• Links to Important Bank of Ghana documents relating

to the financial sector:

•Registered number of Banks as of December 2016 https://www.bog.gov.gh/privatecontent/Banking_Supervision/Licensed%20Banks%20%20Addresses%20-%20December%202016%20(updated).pdf

•Registered number of Rural and Community Banks as of April 2016 https://www.bog.gov.gh/privatecontent/Banking_Supervision/REGIONAL%20DISTRIBUTION%20OF%20RURAL%20BANKS.pdf


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https://www.bog.gov.gh/privatecontent/Banking_Supervision/Licensed Banks Addresses - December 2016 (updated).pdf

https://www.bog.gov.gh/privatecontent/Banking_Supervision/REGIONAL DISTRIBUTION OF RURAL BANKS.pdf

THE FINANCIAL SECTOR IN GHANA• Links to Important Bank of Ghana documents relating

to the financial sector:•Registered number of Non-Bank Financial Institutions

(January 2017) https://www.bog.gov.gh/privatecontent/Banking_Supervision/LICENSED%20NBFIS%20%20AND%20THEIR%20ADDRESSES%20-%20January%202017.pdf

• List of Active and Inactive Forex Bureaux (April 2016) https://www.bog.gov.gh/privatecontent/Banking_Supervision/BOARD%20DATA-REGIONAL%20DISTRIBUTION%20OF%20FOREX%20BUREAUX.pdf


https://www.bog.gov.gh/privatecontent/Banking_Supervision/LICENSED NBFIS AND THEIR ADDRESSES - January 2017.pdf

https://www.bog.gov.gh/privatecontent/Banking_Supervision/BOARD DATA-REGIONAL DISTRIBUTION OF FOREX BUREAUX.pdf


•Links to Important Bank of Ghana documents relating to the financial sector:

•For more links on registered institutions follow this link https://www.bog.gov.gh/supervision-a-regulation/register-of-licensed-institutions


https://www.bog.gov.gh/supervision-a-regulation/register-of-licensed-institutions

THE FINANCIAL SECTOR IN GHANA•Recent Developments in the Financial Sector


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