Last week, the Ghana Investment Promotion Centre (GIPC) organized and hosted a breakfast meeting involving the commercial banks, their regulator, the Bank of Ghana (BoG) and representatives of the private enterprises that comprise their biggest and thus most valuable customers. The meeting had Ghana’s banking sector reforms as its theme.
To this end it served as an excellent platform for private enterprise to be enlightened on the implications of the banking industry reforms carried out by the central bank over the past 18 months or so; and for the banks themselves to learn what their private enterprise customers expect of them now that they have recapitalized and have been subject to a comprehensive array of new directives aimed at strengthening both their risk management and wider corporate governance structures, processes and procedures.
We therefore whole-heartedly commend GIPC for its initiative in offering this platform, which we are certain will result in concrete improvements in the relationships between both counterparties and ultimately will greatly improve both the efficiency and the efficacy of financial intermediation in Ghana.
It is heartening to observe that at least in public, during the meeting, representatives of both counterparties were basically on the same page. Despite the sometimes intense controversies that dogged some of the reforms implemented by the BoG, all stakeholders are now in agreement that they have resulted in a stronger, safer, more capable banking industry which private enterprise can now benefit more than ever before from.
Unsurprisingly, age old complaints were dug up again though – particularly the dearth of availability of bank credit, especially loans of long tenors, and the inordinately high interest cost of such credit where available.
But it is most instructive that banking industry regulators and analysts were able to explain to private business entrepreneurs and corporate executives that both problems will be reduced by the implementation of the reforms. Banks now have more core capital to lend long term, in the face of the dearth of long term deposits which are needed to fund long term loans; and bigger capital and better risk management should combine to allow for both economies of scale and more efficient use of funds, both of which should lower interest rates on loans to private enterprise.
We wish to suggest that in the wake of the crucial success of GIPC’s breakfast meeting last week, the concept should be extended to cover the ongoing reforms applicable to non bank financial intermediaries as well. While the proportion of financial intermediation activity they engage in is much smaller than that of the commercial banks, they nevertheless handle a lot more customers than their banking counterparts, albeit of smaller size with regards to both balance sheet size and business volumes. Besides, the customers they handle are basically less financially enlightened than those handled by the banks and so they need the enlightenment provided by GIPC’s recent breakfast meeting platform even more.
Let GIPC, in conjunction with the BoG and other key stakeholders organize a similar forum to address the reforms in the non bank financial intermediation sector as well. If it can achieve anything close to the positive impact last week’s forum for the banking sector and its private enterprise clients has had, then it would be well worth the effort.