Financial & Banking
Operations in Ghana
A Private Sector Perspective
By
Emmanuel ADU-SARKODEE (BA, MBA, LLB)Group Chief Executive, CDH Financial Holdings

Outline of Presentation•

Overview of Ghana’s Financial Sector- Structure of Industry- Regulatory Framework- Current Performance• Prospects & Risks- Characteristics of the Industry- Prospects & Opportunities- Issues of Risk

Overview of Ghana’s
Financial Sector

Ghana’s Financial System• Ghana’s Financial Sector can bemainly classified into 3 categories
 Banking Insurance Capital Markets

BankingBanking Landscape:• 27 Universal Banks (15 Foreign Owned)• 904 Branches• 137 rural and community banks• 63 non-banking ﬁnancial institutions (ﬁnance houses,savings and loans, leasing and mortgage ﬁrms)• 500 Microfinance Institutions• Minimum Capital Requirement for Banks – $30million• Minimum Capital Requirement for Non-Banks vary
due to size

BankingBanking Landscape:• Total Assets of Banks at $12billion• Deposits: $8 billion• Loans & Advances: $5.5 billion• Industry Return on Assets:5%• Industry Return on Equity: 30%• Top 4 banks make up 40% ofindustry

Performance of Ghana’s Banking Industry$billions

2010

2011

2012

2013

2014

Total Profits

0.29

0.31

0.50

0.71

0.56

Total Assets

11.86

14.71

14.40

16.30

12.30

Total Liabilities

10.27

12.73

12.30

13.89

10.48

Total Deposits

8.30

10.96

10.50

10.53

7.93

Total Earning
Assets

9.27

10.50

11.46

12.94

9.54

Industry Returnon Assets (%)

2.47

2.34

3.45

4.37

4.58

Industry Returnon Equity (%)

18.47

17.34

23.71

29.93

29.29

Insurance
Insurance Landscape• 25 Non-Life Companies• 21 Life Companies• 3 Re-Insurance Companies• 69 Brokers• 6,000 Insurance Agents• Top 5 Non-Life Companies account for 60%
while Top 5 Life Companies account for 80% ofthe industry

Capital Markets
Capital Markets Landscape• 34 Listed Companies on the GSE main market, 3 on
the alternative market• Market Capitalisation on the GSE of $16 billion• 21 Brokerage Firms, 35 Mutual Funds & Unit Trusts• Amount raised on the GSE since inception: $600million• Total equities value traded on the GSE since
inception: $700 million

Ghana’s Financial Regulatory Framework
Type of FIOwnership

Legal Basis

Organised asFund Source

Authorised
Activities

AgencyJurisdiction

UniversalBanks

Private/State

Companies
Act; Banking
Law

Limited Liability
Company

Equity Capital,
CommercialLoans, Deposits

Full-service
banksBank of Ghana

Savings &Loans

PrivateCompanies
Act; NBFI Law

Limited Liability
Company

Equity Capital,
CommercialLoans, Deposits

Tier 2 banks

Bank of Ghana

Rural Banks

Community
ownedCompanies
Act; Banking
Law

Limited Liability
Company

Government
Loans, Deposits

Savings
deposits andmicro-loans

Bank ofGhana/ARB
Apex Bank

Microfinance

Private, NGOs,
Individuals

NBFI Law; Law
on
Cooperatives

Limited Liability
Company,Limited byGuarantee,
Cooperative

Equity Capital,Grants, Loans,
MemberContributions
Deposits

Savings
deposits andmicro-loans

Bank of Ghana,Registrar
General,GHAMFIN

Insurance

Private/State

Insurance Act

Limited Liability
Company

Equity Capital,
Premiums

General & Life
insurance

National
Insurance
Commission

Brokerage
HousesPrivateSEC
Regulations

Limited Liability
Company

Equity Capital

Brokerage,
FundManagement,
Private Wealth

Securities &Exchange
Commission

Characteristics, Prospects& Risks of the Industry

Characteristics of Ghana’s Financial Industry• Low Savings Rates – Total Deposits as a percentage of GDPis about 15% (post-reform). This compares to a savings rateof about 37% in East Asia and 20% in Latin America.

• High Treasury Bill Margins – As a result of the high yieldsof treasury bills, portfolio allocation by the banking
institutions has been in favor of short-term government
Treasury bills. This has also impacted on savings mobilization
and allocation of funds to the other productive sectors of theeconomy.

• Short-term structure of bank lending in Ghana –Highrates on short-term investments, dominated by Treasury bills
have provided a relatively safe outlet for bank’s profit
maximization, leaving a big gap in the long-term segment ofthe market.

Characteristics of Ghana’s Financial Industry• Dominance of the Top 4 Banks - Although there has beensome progress in the privatization of state owned banks
and the formation of many private financial institutions, thedominant position of the four largest universal banks
remains entrenched with 40% of the industry.
• Focus of Private Credit in Real Estate & Services – There isopportunity for providing credit to important segments as
the economy such as agricultural, manufacturing andinfrastructure; as banks have tended to concentrate on
credit to sectors such as construction, service, retailing, andhotels, which are perceived by the banks to be less risky.

Prospects & Risks• Rural Banking – Major financial institutions must start
focusing on providing services to rural areas and getting as
close as possible to depositors to enhance savings
mobilization.

- This can be accomplished by “banks on wheels” to the rural
areas of the country, introduction of more ATM machinesand branch networks to the suburbs of the urban areas.
- There can also be collaborations with the Rural andCommunity Banks who are more embedded in these areas.

Prospects & Risks• Mobile Technology – Mobile technology is transforming
the banking and payment industry by providing added
convenience to existing bank customers in Ghana, and byoffering new services to the unbanked customers withmobile phones. This has the potential to unlock a large
untapped market.
• Big Ticket Projects – The lack of capacity in terms of capitaloutlay by most of the financial institutions in the country
creates an opportunity for larger institutions to participate
in big ticket projects such as the about $2 billion annual
cocoa syndicated loan by COCOBOD which has always
been financed by foreign banks

Prospects & Risks• New Financial Products - The Banking Act allows banks toengage in a number of activities including the acceptanceof deposits, lending, leasing, investments, moneytransmission, portfolio management, credit reference
services and electronic banking; Most financial institutions
in Ghana however, focus on just core traditional functions.
There is therefore opportunities for new entrants.
• Finally, Risks in the Industry- The Ghanaian Financial Sector
is faced with the usual risks that exists in most othercountries. However, the sovereign risks associated with
political conflicts are very subdued unlike most other
African countries as Ghana is the example of a stabledemocratic nation in Africa.

About CDH Financial Holdings• Established in 1986, CDH Financial Holdings Limited started
out as the first discount house in Ghana. The primaryobjective of the company was to help maintain liquidity in
Ghana's financial services sector.

• In a move to further bolster its position in Ghana's financial
markets, and provide its customers with a wider array offinancial services, the company was restructured in 1998
into a holding company, with specialized subsidiaries,
under the group name CDH Financial Holdings Limited.
The company's operations expanded to include such areas
as savings & loans, asset management, stock brokerage,commodities trading, short-term finance, and insurance.

CDH House
No. 36 Independence Avenue
North Ridge
Accra - Ghana
Tel: 0302- 671059
0302- 667428
Website: www.cdhgroup.co
Email: info@cdhgroup.co