Ghana's financial system is based on a number of banks and non-bank financial institutions, including the Bank of Ghana, which, as the Central Bank, has the responsibility of advising the government on the implementation and control of monetary policies. Other institutions include commercial and merchant banks, discount houses, insurance companies, leasing companies, venture capital, a mortgage finance institution, and a stock exchange. Direct financing of projects in the country is provided by the commercial and other banking institutions.
Financial Policy of the Central Bank
In an effort to ensure systematic development of the banking system, the Central Bank (Bank of Ghana), in addition to its traditional functions (for example formulation of monetary policies), also has the responsibility to ensure that banking is responsive to the needs of the public.
In attempt to encourage the establishment of new types of financial institutions, the Bank of Ghana pursues a liberal policy with regard to entry into the banking system, and is actively involved in the promotion of development and rural banking as well as in the establishment of discount houses.
The minimum paid-up capital required for entry into the banking system is as follows:
Ghanaian Banking Business: paid-up capital of not less than 200 million cedis;
Foreign Banking Business: paid-up capital of not less than 500 million cedis, of which not less than 300 million cedis shall be brought into Ghana as convertible currency;
Other Banking Business: to be determined by the central bank of Ghana.
Commercial Banks are currently required to maintain a minimum of 57% of total deposits in liquid reserves. The Bank of Ghana fixes the Central Bank 'rediscount rate', which is used as the benchmark upon which commercial banks base their interest rates. There are several Commercial and Development banks in Ghana.
The National Investment Bank
Bank is an industrial development bank providing financial assistance to manufacturing and processing industries, including agro-industrial projects. It maintains branches in all regions of the country.
The Agricultural Development Bank
serves principally the agricultural sector - food production, livestock breeding, poultry farming and processing of agricultural produce. It has over 31 branches throughout Ghana.
Rural Banks are unit banks established to provide facilities for the rural communities in which they are located. They are owned, managed and patronized by the local people. Some of these banks also operate agencies to cater for communities that are located far from the bank's facilities. Savings mobilized through rural banks are invested in small-scale agricultural activities, cottage industries, transportation and trading. There are currently over 120 rural banks in the country. Rural banks also provide commercial banking services.
Though 'hire purchase' activities were conducted by the banks it was not until 1992 that a leasing law was enacted in Ghana. Since then, over three leasing companies have emerged and they are offering among others equipment leasing in Ghana. These include Ghana Leasing Company Limited, General Leasing Company Limited and LeaseAfric.
Venture Capital provides capital for start-ups and high risk ventures. Ghana's first official venture capital fund ? the Ghana Venture Capital Fund Limited (GVCF) - is managed by the Venture Fund Management Company. The Commonwealth Development Corporation is the lead investor and was joined by a few local banks and other foreign financial institutions. It has focused mainly on medium-sized, indigenous growth companies with expansion projects and shied away from start-ups because of the higher risks entailed.
The Home Finance Company (HFC) is the leading secondary mortgage financing institution in Ghana. HFC was established in 1990 as the implementing agency for a housing finance pilot scheme component for an Urban II Project provided to the Republic of Ghana by the International Development Association (World Bank). The IDA was joined by Social Security and National Insurance Trust (SSNIT), Merchant Bank and a number of insurance companies.
There are over twenty four (24) insurance companies currently operating in Ghana.
In a bid to improve financial intermediation in the country, the non-bank financial institutions comprising the insurance and trust companies have joined forces with the banking institutions to establish discount houses in order to bring into a single market institutions with cash balances for their intensive and effective use. These include the Consolidated Discount House and the Securities Discount Company, Gold Coast Securities Limited, and National Trust Holding Company (NTHC).
Non-Bank Financial Institutions
Ghana's non-bank financial institutions include the Social Security and National Insurance Trust (SSNIT), the Ghana Stock Exchange, Insurance companies, discount houses and other institutions.