Launch of the Absa Africa Financial
Markets Index 2019
Keynote Address by Dr. Maxwell Opoku-
Afari, First Deputy Governor, Bank of
Ghana
The Ritz-Carlton Washington Hotel 1150
22nd Street, N.W.
Washington, DC 20037
-
07:20 07:30 AM
Ministers of Finance
Governors of Central Banks
Management and Representatives of OMFIF
Management and Representatives of ABSA
Executives of Financial Institutions Present
Representatives of the IMF
Distinguished Ladies and Gentlemen
A very Good Morning to you all
1. Let me first begin by thanking OMFIF for extending an invitation to me to be the
keynote speaker at the launch of the Absa Africa Financial Markets Index 2019. It is
indeed a great pleasure to be able to join you today and to also join such seasoned
distinguished guests to deliberate on important issues bordering on capital market
development, benchmarking regulation against global standards, overcoming regional
integration challenges, and the use of new technology and data sharing to improve
efficiency and innovation on the African continent. These are critical issues that
confront African countries as they strive to attract foreign investment for sustainable
development and poverty reduction.
2. The ABSA African Financial Markets Index was first launched in 2017 by OMFIF
and Barclays Africa Group (now ABSA Group Limited) through extensive quantitative
and qualitative research and analysis. It is in its third year and has become a key
reference point in the assessment of the development of African Financial Markets. The
Index assesses countries according to six pillars: market depth, access to foreign
exchange, market transparency, tax and regulatory environment, capacity of local
investors, macroeconomic opportunity and the legality and enforceability of standard
financial markets master agreements.
3. In 2018, the index increased its coverage to include Angola, Cameroun and
Senegal, which brings to twenty the number of African countries covered. Over the
years, there have been new initiatives and policies by the countries covered under the
survey that have led to growth in their Financial Markets and consequently, in the wider
African financial sector. Most countries have shown progress in their financial sectors
over the last two years of ranking by focusing on one or more of the pillars.
4. Kenya, Morocco and the Seychelles have had the largest improvement in their
rankings over the last year, particularly with respect to access to foreign exchange.
Nigeria's score has also strengthened, due to policies augmenting market depth and
enhancing the capacity of local investors. The index has therefore served as a guide to
where analyst and policy makers must focus in trying to improve their financial markets
to attract investors. This year's edition is to focus on policy and market development
initiatives and will undoubtedly boost developments in the regional financial markets.
5. Ladies and gentlemen permit me to share with you how the ABSA Financial
Markets Index is helping to shape the policy dialogue in Ghana. The 2017 Barclays
Africa (now ABSA) African Financial Markets Index, noted that of the six pillars used in
the assessment of African financial markets, improving the legal and regulatory
frameworks through establishing the legality and enforceability of standard financial
markets master agreements of the Ghanaian financial markets could provide a major
boost and enhance liquidity in the bonds and equities markets.
6. The results of the Barclays survey noted that in Ghana, ISDA documentation
(International Swap and Derivatives Association) was well recognized but Global Master
Repurchase Agreement (GMRA) was in limited use, Global Master Securities Lending
Agreement (GMSLA) was rarely used and the insolvency framework needed to be
strengthened. Therefore in 2017, a stakeholder committee in Ghana, led by the central
bank agreed on key reform measures that could improve the legal framework for the
financial markets in Ghana.
7. These included the adoption of GMRA for repo trading and at a later stage the
GMSLA for securities lending, the linking of the local Central Securities Depository (CSD)
to international clearing platforms like Euroclear and the strengthening of the insolvency
framework in Ghana. The result of these reform initiatives is the publishing of
guidelines for a GMRA-based repo trading in Ghana, a Country Annex and country
annexes that was just yesterday launched herein Washington D.C.
8. Apart from being a vital source of secured financing for banks and financial
institutions, and a key tool for the implementation of monetary policy, repos also offer
a low-risk and liquid investment for cash, as well as the efficient management of
liquidity and collateral by financial firms and can be used to hedge or modify the risk
profile of portfolios.
9. Netting rights and setoffs are generally recognized and upheld under Ghanaian
law. With respect to the banking sector, the BoG will issue a notice to clarify the
recognition of netting arrangements in financial contracts in the Banks and Special
Deposit Taking Institutions Act, 2016 (Act 930) in support of efforts to recognize Ghana
as a netting positive jurisdiction.
10. Our experiences in Ghana as a major destination for higher yield-seeking non-
resident investors, tells us that access to foreign exchange, the Pillar 2 of the ABSA
Financial Market Index, is an important consideration for both bond and equity
investors. These investors many times would like to repatriate coupon proceeds,
sometimes principal repayments on matured bonds and dividends in hard currency. This
is more so during periods of tighter global financing conditions.
11. It is therefore important to develop liquid, deep and efficient domestic interbank
markets that can support these foreign investors to give them the required comfort to
continue to invest in our markets. It is our view that a liquid interbank market can be
well supported when the central bank has adequate foreign reserves. It is for this
reason that the Bank of Ghana has in the past few years focused on building on our
foreign reserve buffers to support our price stability mandate.
12. The capacity of local investors, pillar 4 of the Absa Africa Financial Market Index
is an important pillar which becomes more critical going forward. In Ghana, we are
beginning to realize the important role that institutional investors such as our pension
funds, asset managers and insurance firms could play in not only financing part of
government budget but also providing long-term funding for capital projects. This has
become important as we seek to find the right balance between domestic and foreign
sources of funding.
13. That said, there is more work to be done as we seek to develop the domestic
market to enhance efficiency and create the needed market for capital.
13. Let me, at this juncture, turn attention to how we can leverage on new technology
and data sharing to improve efficiency and innovation on the African continent.
Presently, Ghana is transitioning to a new kind of retail banking system where a large
segment of the population previously unbanked, are being absorbed into the financial
services sector, via, mobile money. To further expand access to financial services, the
Bank of Ghana and Government are initiating policies to further strengthen the financial
and payment systems to foster smooth delivery of financial services and engender
financial inclusion. Some of these policies included agent registry, national identification
exercise and digital property address system. Let me share a few of the initiatives that
are already in train:
14. Developing an Agency Registry: Agency network has become an important
channel for delivering financial services at affordable cost. A digital Agent Registry is
rolled out by the Bank of Ghana in collaboration with payment services providers to
enhance identification and provide oversight of agent's business. The Registry focuses
on mapping and capturing of data on all agent access points and facilitating customers'
access to preferred agent point for convenient and efficient service delivery. The
register will also be used to inform stakeholders on operations of agents in violation of
regulatory and prudential requirements.
15. Citizenry Identification through activities of the National Identification
Authority: The banking industry, through the initiative of the Bank of Ghana, co-
operated with the National Identification Authority (NIA) to implement a national
identification system that meets the Know Your Customer (KYC) and Customer Due
Diligence (CDD) requirements of the banking sector. The identification system is based
on biometric technology and would provide continuous verification access to banks at
all times. The system is expected to also address incidence of identity fraud at point of
transactions and serve as reliable system for profiling the underserved and the
unbanked.
16. Fostering a Digital and Property Address System: A Digital and Property
Address System, was put in place by Government to allocate addresses to properties
through the use of Global Positioning System (GPS) technology. The address
system seeks to improve business operations and lessen the burden involved in
identifying customer location. A national address registry is expected to be generated to
enable financial service providers to validate home and property addresses of customers
to facilitate financial service delivery.
17. Ensuring Mobile Money Interoperability: As part of the Bank's policy to
transform the payment ecosystem, an interoperability project was implemented to
boost the efficiency, accessibility and competition within the mobile money space.
Under the project, disparate mobile money platforms were linked to each other through
central switch to facilitate funds transfer across mobile money networks. The system is
also expected to integrate with interbank payment systems infrastructure to create an
integrated and interoperable digital retail payments ecosystem, and facilitate seamless
funds transfer across payment systems. The project has the potential to stimulate
uptake in mobile financial services and promote financial inclusion.
18. The points raised above demonstrate that the ABSA Financial Markets Index for
which we are launching the fourth edition has become a major reference point for
economic policy makers and financial sector leaders in Africa. This is important in our
quest to improve upon the efficiency of the African financial markets to attract lower
funding sources to better the economic life of our people. I urge ABSA to continue to
challenge policy makers using this index, other innovative tools and a forum such as
this. On behalf of the Bank of Ghana, I wish to congratulate ABSA for successfully
launching the fourth edition of the African Financial Markets Index today and to thank
you all for the good audience.
19. To conclude let me state clearly that the potential to expand our economies
through structural reforms and initiatives should form the cornerstone of all policies.
Ghana's economy is going through a structural transformation and these initiated
policies are supporting the move in that direction. As a continent, policies should be
focussed on how to develop a vibrant capital market to support growth, how to
benchmark our internal regulation against global standards to help improve standards,
overcoming regional integration challenges to support growth, and leveraging on new
technology and data sharing to improve efficiency and innovation. Let us ponder
critically over these issues as we go through our deliberations.
20. I look forward to fruitful engagements and that the key takeaways will help
inform policies going forward.
Thank you