Ghana’s financial services sector can be classified into three main categories
i.e., banking, insurance and capital markets. The sector has shown significant
development over the past decade.
Banking
The Bank of Ghana (BoG) Act 2002 (Act 612) has been replaced with the Banking
Act 2004 (Act 673) to strengthen the regulatory and supervisory functions of
BoG.
In February 2003, BoG formally introduced the Universal Banking Business Licence
(UBBL), which is expected to bring more competition within the industry. To
operate under the UBBL, existing banks must have a minimum net worth of ¢70billion
(excluding statutory reserves), and new banks should have a paid-up capital
of ¢70billion. Banks are required to hold 9% of the cedi and forex deposit
base with BOG on daily basis as primary reserves and 35% of their deposit base
in cedi denominated assets as secondary reserves.
The Government of Ghana Index-Linked Bonds (GGILBs) was introduced in 2001,
which as part of the reserve requirements converted Government of Ghana (GoG)
short-term liabilities into long-term loans. BoG requires banks to hold 15%
of their total deposits in GGILBs. The GGILB is now being phased out by the
new 2nd and 3rd year fixed or floating bonds.
Currently, there are 19 banks operating in the formal banking sector under
different banking licenses with Standard Trust Bank Limited being the latest
addition.
PwC publishes an annual Banking Survey for use by industry practitioners, analysts
and financial/economic researchers.
Insurance
The Ghanaian insurance market is a thriving one with huge potential for growth
in both the life and non-life markets. The competition is however keen in the
Life market as a result of the anticipated passage of the new insurance bill
which will require the separation of Life and Non-Life businesses and an increase
in the capital requirement to ¢7billion.
The Ghanaian market continues to demonstrate some unique characteristics such
as:
- Continuous growth as insured seek to self-insure more of their risks.
- Tougher competition for many finite products.
- A growing presence in both life and non-life re-insurance.
Product development continues to be concentrated on the core property/casualty
market and insurers are constantly seeking to identify alternative solutions
for clients whose needs are not being addressed.
The challenges facing the industry includes the under pricing of policies
and the worsening position of bad debts which has resulted in most insurance
companies making significant underwriting losses.
The need for insurance firms to spread their risks in order to reduce the impact
of risk during any catastrophe led to the creation of the Ghana Reinsurance
Company, which is mandated to receive legal cession 20% of premium as reinsurance.
The future of the insurance market looks bright especially with the anticipated
introduction of a common currency for the West African Common currency coming
into effect on 1 July 2005. This will provide great opportunities for companies
to explore into the neighbouring countries.
Capital Markets
The Ghana Stock Exchange (GSE) was set up on the 26 of November 1990 and has
laid down rules and regulations for companies seeking to be listed on the Exchange.
The GSE operates under the rules and regulations of the Securities Industry
Law 1993 (PNDCL 333) as amended.
The Securities and Exchange Commission (SEC) sets rules and laws to create
level playing ground for Investors, Brokerage Firms and Listed Companies on
the GSE. It serves to boost investor confidence and protect the investor on
the Exchange. The SEC also sets laws for unit and mutual trust operators in
the country.
Currently, there are 27 listed Companies, 10 brokerage firms, 5 mutual funds
and 1 unit trust companies on the GSE.
PricewaterhouseCoopers has provided and continues to provide professional services
to the market leaders in the Financial Services Sector.
