Making finance work for Ghana/Africa

By Charles Takyi-Boadu Posted: Tuesday, June 17, 2008
A Technical Advisor at the Ministry of Finance and Economic Planning (MOFEP), Dr Sam Mensah has stressed the urgent need to update the country’s company code and bankruptcy laws.
He believes this has the tendency of making finance work for Ghana as a corporate country.
His concern has emanated out of the fact that these laws have not been subjected to a review for a long period.
Dr Mensah made the call at a partnership forum in Accra under the theme- ‘Making Finance work for Ghana’.
The forum precedes the ‘Making Finance work for Africa’ conference, which begins, today at the La-Palm Royal Beach hotel in Accra.
It brings together more than 250 senior-level financial sector experts from over 30 countries.
At the partnership forum, leaders of Africa and International Institutions, government officials, central banks, prominent researchers and international experts will discuss the priorities for developing African financial sectors.
Among the key issues to be discussed are how to develop the Ghanaian micro-finance and micro-insurance sector, reduce lending risks and develop effective consumer education and financial literacy.
Opening the forum here in Accra, the Deputy Minister of Finance and Economic Planning, Professor Gyan-Baffour conceded that while reforms in the financial sector have resulted in expansion and increasing competition in the commercial banking system, it has also been attributed to the fact that the services of Rural and Micro-Finance Institutions (RMFIs) and Rural and Community Banks (RCBs) have not been well suited to the needs and risk profiles of farmers and operators along the agricultural value chain.
“We recognise that while agricultural finance has been problematic worldwide and very few agricultural development banks have succeeded over time in servicing the agricultural sector and becoming self-sustaining, recent years have seen considerable growth in experience and diversification of methodologies”, he emphasised.
In Africa, as in other regions, countries with higher levels of financial development experience better resource allocation, higher GDP per capita growth and faster rate of poverty reduction.
Despite recent growth, African financial systems remain shallow and lack of access to finance by households and firms is a major barrier to business activities, particularly for small enterprises
Ralf Schroeder, Director of the German Federal Ministry of Economic Cooperation and Development which champions the partnership for making finance work for Africa emphasised “financial sector development is a strategic driver of growth and employment in Africa. Access and cost of finance are bigger problem for firms in Africa than any other region in the world.”
Available information has it that only 20% of adults in sub-Saharan Africa hold a bank account at a formal or semi-formal institution.
“Poor people need access to financial services to invest in economic activities, in health, education and reduce their vulnerability to household emergencies”, noted the Vice President of the African Development Bank (ADB).
Architects of the effort emphasised that African financial institutions enjoy considerable liquidity.
Thus, strategies to strengthen the financial sector should help to unleash the current potential of African banks and other financial institutions.
Currently, total credit for enterprise and household is estimated to be within the region of 14% of the collective Gross Domestic Product (GDP) in Africa, insufficient to ignite accelerated growth and poverty reduction.
An increase to 25% of GDP-a level achieved by many other low-income Countries would translate to more than $70billion of additional investment resources for households and firms.
‘Making finance work for Africa is an increasingly widely shared goal among policy makers on the continent.
Various African governments and development partners recognise that they’re a need to move beyond ‘business-as-usual’ in developing African financial sectors as drivers of private sector development, employment and growth.
Economic growth in Africa appears to be critical to job creation and poverty reduction since it requires stronger and innovative financial institutions.