Financial institutions

The financial sector landscape in Ghana is defined to include banks (foreign and domestic), specialized deposit-taking institutions (SDIs), non-bank financial institutions (NBFIs), money and capital markets, insurance companies and pension funds. After the lockdown caused by the COVID-19 pandemic in 2020, the industry has shown resiliency, with development in all sub-sectors. The industry's general prognosis is hopeful, supported by positive economic and demographic trends pointing to expanding and increasingly affluent prospective consumer base over the medium term. Ghana’s financial sector is regulated and supervised by four distinct authorities, respectively the Bank of Ghana (BoG), National Pensions Regulatory Authority (NPRA), Securities and Exchange Commission (SEC) and National Insurance Commission (NIC). Like many countries in Africa, Ghana’s financial sector is dominated by banks where their traditional functions are to accept deposits and offer credit to both households and the private sector. At end-December 2021, total financial sector assets increased to GH₵260.43 billion (US$ 44.14 billion) making 59.1% of GDP from GH₵213.35billion (US$ 38.1 billion) that contributed 55.6% of GDP at end-December 2020.

Banking sector

The banking system in Ghana recorded marked changes in terms of size, outreach and health over the past years. The banking sector is well structured by the Bank of Ghana, and it has been developing steadily alongside reforms within the sector. The banking sector performed well in 2021, with continued increase in assets, deposits, and investments, according to the Bank of Ghana. Ghana's formal banking system consists of the Central Bank (Bank of Ghana) and a variety of other banks, including commercial banks, development banks, merchant banks, and a slew of rural unit banks. The Bank of Ghana, as the country's central bank, is in charge of implementing monetary policy. Previously, state-owned institutions with little competition dominated banking in Ghana. However, some state-owned banks have been privatized in the previous decade as part of the government's Divestiture Implementation Program. In 2021, banking sector of Ghana comprised 23 banks, 25 Savings and loans institutions, 11 Savings and loans institutions, and 3 Finance and leasing companies.

The asset and liability structure of the banking sector remained broadly unchanged since 2019. Banks’ investments continue to dominate the assets portfolio, with its share increasing from 37.5 percent in 2019 to 46.2 percent in 2021 before to decrease to 35.8 percent in 2022. This increment mirrors the increasing appetite of banks for less risky assets. The share of loans and advances (net) also decreased from 31 percent in 2019 to 27.6 percent in 2022. On the other hand, the proportion of the cash and due from banks consistently declined between 2019 and 2021 due in part to the reduction in Bank of Ghana’s primary reserve requirement before to rise to 27.7 percent in 2022. Other assets, notably fixed assets and non-earning assets has shown a slight change from 2019 to 2021 and then increased marginally to 8.9 percent in 2022.

Despite economic shocks caused by the COVID-19 pandemic, the banking sector remained solvent, profitable, liquid, and sound in 2021. Bank profitability was largely sustained until 2021 and 2022, as evidenced by key profitability measures particularly return on equity (ROE) and return on assets (ROA) showed an upward trend between 2019 and 2021 however, there was a decline in 2022. The banking sector’s liquidity has been decreasing since 2019 but in 2022, the core liquid assets to total deposits ratio rose from 29.7 percent in 2021 to 38.8 percent in 2022, while the core liquid assets to total assets ratio increased from 20 percent to 27.7 percent over the same time. The asset quality of the industry improved in 2022, as the NPL ratio fell from 15.12 percent in 2021 to 14.8 percent in 2022. The NPL ratio decreased due to faster increase in total loans (29.8% year on year growth) relative to the NPL stock (26.1% year on year growth). The industry's solvency situation, as measured by the Capital Adequacy Ratio (CAR) in December 2022, was greater than the prudential minimum of 13 percent, but it had dropped from 19.6 percent in December 2021. The CAR fell due to bank losses on mark-to-market investments, as well as an increase in risk-weighted assets due to the depreciation of the Ghana cedi and growth in actual credit over the year.

Financial inclusion

Growth in the digital finance is mirrored by the surge in number of mobile money accounts subscriptions and volume of transactions among others. There has been a significant increase in the mobile money subscribers and value of transactions since its inception. The number of registered mobile money accounts increased from 32.6 million in 2018 to 48.3 million in 2021, surpassing the country’s total population of 32.83 million. Both the volume and value of mobile money transactions consistently increased since 2018. Indeed, the harmonization of Airtel and Tigo mobile money platforms, which saw the merger of the two MNOs into ArtelTigo, also contributed to the growth of the mobile money transactions and volume.

The growth in digital finance has increasingly broadened financial inclusion in Ghana as account ownership at a financial institution or with a mobile money; service provider has significantly increased across all the age groups. The percentage of population above 15 years with account ownership has increased from 40.5 percent in 2014 to 68.23 percent in 2021. While the percentage of adult population (above 25 years) with account ownership remarkably increased from 42.44 percent to 69.67 percent that of the young adults (15 to 24 years) increased from 36.42 percent to 65.22 percent over the period 2014 to 2017. However, the surge in Ghana’s percentage of population ages 15+ owning accounts in 2021 is lower compared to Kenya. In relation to Nigeria, Cote d’Ivoire, Togo, Uganda, Tanzania, Ghana’s account ownership is higher. With regard to the gender divide, while account ownership has increased among both males and females, the share of the males in total account ownership is exceedingly higher relative to females suggesting the existence of gender inequalities/gaps in account ownership.

Insurance Sector

Ghana’s insurance industry continues to grow over time. The overall number of regulated entities in 2020 was 163, up from 150 in 2019. The year 2020 saw the entry of thirteen (13) insurance intermediaries (twelve brokers and one adjusting company). The National Insurance Commission (NIC) continues to encourage insurance sector innovation in order to spur growth. In its efforts to foster innovation in the insurance business, the regulator has remained steadfast in its clearance and supervision processes, while also continuing to help industry players through the development and use of digital platforms. The Insurance Act of 2021 (Act 1061) and the complete operationalization of the Innovation Hub would increase the NIC's regulatory and supervisory procedures, as well as the provision of insurance services to the public.

The total assets of the insurance industry continue to grow with the non-life insurance dominating the industry. The overall assets of the insurance industry increased by GHS1.25 billion (US$ 240.38 million) from GHS7.65 billion (US$ 1.47 billion) in 2019 to GHS8.74 billion (US$ 1.47 billion) in 2020. This indicates a 17% growth in the Insurance Industry's total assets. (See Figure 7). While assets of all the sub-sectors increased, Life insurance assets increased by 21% from GHS3.85 billion (US$ 740.38 million) in 2019 to GHS4.65 billion (US$ 830.36 million) in 2020. Non-Life assets increased by 13% from GHS2.86 billion (US$ 550 million) in 2019 to GHS3.22 billion (US$ 575 million) at the end of 2020. The reinsurance sector's assets completed the year 2020 at GHS0.87 billion (US$ 155 million), up from GHS0.78 billion (US$ 150 million) in 2019.

Capital Markets

The market capitalization of the Ghana Stock Exchange (GSE) continues to grow overtime amid fluctuations. The Ghana Stock Exchange Composite Index (GSE-CI) fell to 2,443.91 points in December 2022 from 2,789.34 points the previous year. This corresponds into a 12.4 percent year-on-year loss in December 2022, compared to a 43.7 percent gain in December 2021. The GSE-Financial Stocks Index (GSE-FSI) closed at 2,052.6 points, representing a 4.6 percent loss compared to a 20.7 percent gain over the same time in previous year. Uncertainty caused by inflation and exchange rate pressures, as well as portfolio reversals, is ascribed to the year-on-year loss. At the end of May 2023, there were total 38-listed companies on the Bourse with 32 equities listed on the main market of the GSE while six were on the Ghana Alternative Market (GAX). Total market capitalization was GH64.51 billion at the end of December 2022, reflecting a 0.02 percent increase compared to an 18.6 percent increase in December 2021. The modest increase in market capitalization was primarily due to the listing of Ashanti Gold Corporation (ASG).

In 2015, the Ghana Fixed Income Market (GFIM) was launched with the aim of providing a fair, transparent and efficient market for fixed incomes and other securities or instruments. It was established to facilitate the secondary trading of all fixed income securities and other securities to be determined from time to time. At the end of March 2023, there were 50 registered members of the GFIM made up of 20 Licensed Dealing Members (LDMs), 19 Primary Dealers and 11 Non-Primary Dealer Banks. Among others, the securities or instruments listed are government of Ghana Treasury bills, notes and bonds, Bank of Ghana money market instruments, corporate notes and bonds, repos and other fixed income securities.

Pension system

Pension coverage improved in 2021, with improvements in both the BNSSS (1st Tier) and private pensions (2nd and 3rd Tier) contributions. At the end of 2021, active BNSSS contributors increased to 11.7 million, from 1.6 million in 2020. The required 2nd Tier population has also grown, from 2.1 million in 2020 to 3.2 million by the end of 2021. There were 415,950 people enrolled in various informal sector projects. In 2021, BNSSS funds increased by GHS100 million, while Private Pension Scheme funds increased by GHS6 billion. The Private Pension Schemes' expansion was mostly driven by the accumulating strength associated with defined contribution schemes in their early days of operation, as opposed to the matured BNSS, which is a defined benefits scheme. For 2021, the BNSSS maintains a well-diversified portfolio that includes both traditional and non-traditional investing asset classes, while almost 84% of Private Pension Funds were held in Government of Ghana Securities.

Asset Management Sub-sector

In 2020, total assets under management in the fund management industry grew however, the total asset under the Collective Investment Scheme Sector, which includes mutual funds and unit trust schemes; fell by 17.8% percent, while the total asset under the Discretionary Funds Sector fell by 20.85 percent. Pension funds increased by 24.10 percent in 2020. Money and capital markets remain the dominated portfolio allocation destination from 2018. Since 2019, capital market dominated as the sound destination of funds by fund managers with more than 60 percent of managed funds while 27.05 and 21.1 percent was allocated to the money market respectively in 2019 and 2020. The significant surge in equity market allocations signify investors’ shift in preference for capital market instruments.