Abstract
This chapter discusses the institutional and regulatory framework underpinning Ghana’s banking reforms and its impacts on access to credit by Micro, Small and Medium Enterprises (MSMEs). It also examines the various banking reforms introduced by the Central Bank of Ghana since 1953. It argues that the recent banking reforms have generally been occasioned due to the lack of efficient regulatory and institutional framework to govern the sector. The chapter used a qualitative desktop study approach to analyse how Ghana’s banking reforms have been managed, with a comparative analysis of Nigeria and South Africa’s successful reforms of their banking industries. It was found among others that, unlike Nigeria and South Africa, the banking reforms in Ghana over the years and their impacts on credit flow to the productive sectors of the economy have not been significant. The surge in competition in terms of the size of deposits and shares of these banks on the market has lent little to the financing of MSMEs. The ineffective legal framework was identified as constituting a major avenue for banking sector mismanagement. Considering the changing nature of the economy, a constant revision and harmonisation of regulations and legislation are recommended as policy measures to address emerging variations.
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Notes
- 1.
The IMF has indicated that with the exceptions of Ghana, Nigeria and South Africa with commendable financial sector developments worth appreciating, many sub-Saharan African countries have their financial markets only beginning to bud (IMF, 2016). This informed the choice of these countries for our comparative analysis.
- 2.
For example, the US government spent about $700 billion to bail out or insure the assets of several financial institutions. This was made possible through the Troubled Asset Relief Program (TARP) program of the United States government, designed to purchase assets and equity from financial institutions to strengthen its financial sector. It was signed into law by U.S. President George W. Bush on 3 October 2008. Likewise, the UK government declared a bank rescue package of about $740 billion in loans and guarantees.
- 3.
In the local Akan dialect of Ghana “Susu” literally translates “to measure”. The term was coined to describe a cooperative undertaking in which one receives ‘a measure’ of as much as what he contributes at the end of the month or year.
- 4.
The political ideology of the government of the Convention Peoples’ Party under the leadership of Ghana’s first President, which leaned to the left was critical to such policy direction of the banking sector at the time.
- 5.
The capital adequacy ratio (CAR) is a measure of a bank’s solvency.
- 6.
Apart from liquidity challenges and the inability of the banks to meet their CAR, other factors the BoG cites for the clean-up include poor corporate governance, false financial reporting and insider dealings amongst top executives and board room members of the banks. The UT and Capital banks are always cited as examples of banks that fell due to corporate governance malpractices and insider dealings as part of their shortfalls.
- 7.
The ARB Apex bank is the umbrella bank established to manage all rural and community banks in Ghana.
- 8.
The majority of the banks in Ghana have dedicated desks with specialised officers to provide banking services to MSMEs, except that not so much can be said of better incentive packages to the MSMEs concerning the terms and conditions associated with the credit packages to these enterprises.
- 9.
This is the authors’ construct of a suggested nomenclature of such legislation.
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Korankye-Sakyi, F.K., Abe, O.O., Yin, E.T. (2023). Revisiting MSMEs Financing Through Banking Reform Processes: Assessing the Ghanaian Legal Experiences. In: Peprah, J.A., Derera, E., Ngalawa, H., Arun, T. (eds) Financial Sector Development in Ghana. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-09345-6_9
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