Transcript afraca regional workshop on rural financial intermediation accra

AFRACA REGIONAL WORKSHOP
ON RURAL FINANCIAL
INTERMEDIATION
ACCRA, GHANA
REGULATORY FRAMEWORK FOR
FINANCIAL INCLUSION IN GHANA
Monday, April 13, 2015
1
OUTLINE
 INTRODUCTION
 WHAT IS FINANCIAL INCLUSION
 BANK OF GHANA’S ROLE IN FINANCIAL INCLUSION
 CHALLENGES IN REGULATION FOR FINANCIAL
INCLUSION
 BANK OF GHANA’S APPROACH
 CONCLUSION
Monday, April 13, 2015
2
INTRODUCTION
 No debate about the need for financial inclusion. General
agreement exists about the benefits of providing increased
access to financial services.
 Access to finance is critical for broad-based economic
development and growth. Lack of access inhibits lives and
limits the choices.
 2005 - UN declared as year of microfinance - to focus
attention on innovative ways of providing and sustaining
access to finance by countries and governments for the
underserved segments of their populations.
Monday, April 13, 2015
3
INTRODUCTION-cont.
 The debate has been about how to achieve
financial inclusion. The crux of that debate is:
what policy frameworks support financial
inclusion and how can access to financial services
be broadened and deepened.
 It is appropriate therefore that AFRACA has
chosen the theme ‘Rural Financial Intermediation
for Growth and Wealth Creation’, for this Regional
workshop.
Monday, April 13, 2015
4
WHAT IS FINANCIAL INCLUSION?
 Encompasses the processes for providing opportunities for
people to save, to access credit and to insure against
relevant risks that they face.
 Challenge is: Developing the appropriate institutions,
products and services that ensures that people desiring
these services are able to access them.
 Access means more than availability; services and products
should be cost effective, timely and appropriate.
 Regulatory policy has a critical role to play in enhancing
access to financial services.
Monday, April 13, 2015
5
BANK OF GHANA’S ROLE IN FINANCIAL
INCLUSION - 1
 BOG has responsibility for fashioning regulatory policy
aimed at ensuring the safety, soundness and stability of the
banking and financial system.
 This role includes licensing and supervising an appropriate
mix of institutions to ensure financial service provision to
all segments of the population.
 Ghana boasts of a well diversified financial system, which
now comprises:





BOG and the 26 universal banks
The ARB Apex Bank and the system of rural and community banks
(RCBs) – Apex Bank and 136 RCBs.
Deposit taking non-bank financial institutions – savings and loans
companies (19), finance houses (21)
Non-deposit taking financial institutions – leasing and mortgage
companies (7)
Credit Reference Bureau (1)
Monday, April 13, 2015
6
BANK OF GHANA’S ROLE IN FINANCIAL
INCLUSION -2
 These institutions are governed by clear legal and
regulatory framework – The Banking Act, 2004 as
amended by the Banking (Amendment) Act 2007 and
the Non-bank Financial Institutions Act, 2008, ARB
Apex Bank Regulations, LI 1825
 RCBs and Savings and Loan Companies have been the
key formal institutions for delivering financial services
to the poor and the marginalized.
 Some commercial banks have also set up microfinance
departments/SME units to deliver banking and credit
services to small and micro-credit customers.
Monday, April 13, 2015
7
BANK OF GHANA’S ROLE IN FINANCIAL
INCLUSION - 3
 BOG is supporting the harnessing of ICT to deliver
financial services through a number of ways:
The establishment of GhIPSS -the e-zwich payments
platform and smart card – involving the use of biometric
smart card technology to facilitate savings and payments
for the unbanked and underbanked – applications to
cocoa farmers, salary customers, student remittances, etc
 The introduction of branchless banking which allows
banks to partner telecom companies to deliver mobile
money services. MTN mobile money and Zain zap
already operating –payment facilitation.
 Objective is to increase access across a variety of
platforms.

Monday, April 13, 2015
8
BANK OF GHANA’S ROLE IN FINANCIAL
INCLUSION - 4
 An unregulated microfinance sector has emerged
and is growing in numbers and size and posing
challenges to safety and soundness.
o
FNGOs estimated at about 50 countrywide
o
Money lenders are over 200
o
Available data (2009) on susu operations indicates a
membership of over 1500 (including companies) with over
GH¢44 million in savings (about USD 31 million).
o
Mini savings and loans companies ??
Monday, April 13, 2015
9
CHALLENGES IN REGULATION FOR
FINANCIAL INCLUSION - 1
 For formal sector institutions such as banks,
RCBs, S&Ls, - cost in terms of human and
financial resources. BOG has borne this up to
now. Issue is should regulated institutions be
charged? Fully? Partially? – Implications!
 Expanding the perimeter of regulation to:
o Microfinance institutions,
o Money lenders,
o Susu companies and Susu collectors – while critical for
expanding access to the poor in rural areas and or the
urban peripheries, costly to supervise.
Monday, April 13, 2015
10
CHALLENGES IN REGULATION FOR
FINANCIAL INCLUSION - 2
 This group of institutions present a different set of
challenges to regulation and supervision such as:
What level of regulation is appropriate?
 How can regulation be made cost-effective?
 How can regulation be achieved without stifling
innovation?
 How do we ensure integrity in financial services,
especially microfinance?
 Credit Reporting Act, Borrowers and Lenders Act. – can
these help?

Monday, April 13, 2015
11
BANK OF GHANA’S APPROACH - 1
 BOG believes that appropriate regulation and supervision
is necessary to achieve safety and soundness as well as
protection for depositors and creditors.
 In that regard, deposit taking institutions require closer
supervision than non-deposit taking institutions.
 Regulation and supervision has taken the form of:





Licensing of institutions
Setting minimum capital requirements
Requiring periodic prudential reporting
On-site visits
Installation of risk management systems
Monday, April 13, 2015
12
BANK OF GHANA’S APPROACH - 2
 Expansion of the perimeter of regulation and
supervision




To bring in hitherto unsupervised institutions – Susu
companies, money lenders, microfinance institutions.
Possibility of creating lower tiers of institutions below S&Ls
and FHs.
Establish licensing criteria for such institutions, including
minimum capital requirements as appropriate, prudential
reporting, limits on operational areas, branching, etc.
Require membership of a trade association with jointly
approved operating guidelines – element of self-regulation.
Monday, April 13, 2015
13
CONCLUSION
 Financial inclusion is essential for poverty
reduction and wealth creation
 Regulatory policy can contribute by:
 engendering a safe and sound financial system;
 supporting the creation and development of appropriate
institutions, products and services for meeting the needs of
the poor and excluded;
 encouraging the harnessing of technology to deliver costeffective financial services; and
 balancing the need for regulation with the risks posed to
the financial sector.
Monday, April 13, 2015
14
Monday, April 13, 2015
15