You are here -allRefer - Reference - Country Study & Country Guide - Ghana >

allRefer Reference and Encyclopedia Resource

allRefer    
allRefer
   


-- Country Study & Guide --     

 

Ghana

 
Country Guide
Afghanistan
Albania
Algeria
Angola
Armenia
Austria
Azerbaijan
Bahrain
Bangladesh
Belarus
Belize
Bhutan
Bolivia
Brazil
Bulgaria
Cambodia
Chad
Chile
China
Colombia
Caribbean Islands
Comoros
Cyprus
Czechoslovakia
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
Ethiopia
Finland
Georgia
Germany
Germany (East)
Ghana
Guyana
Haiti
Honduras
Hungary
India
Indonesia
Iran
Iraq
Israel
Cote d'Ivoire
Japan
Jordan
Kazakhstan
Kuwait
Kyrgyzstan
Latvia
Laos
Lebanon
Libya
Lithuania
Macau
Madagascar
Maldives
Mauritania
Mauritius
Mexico
Moldova
Mongolia
Nepal
Nicaragua
Nigeria
North Korea
Oman
Pakistan
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saudi Arabia
Seychelles
Singapore
Somalia
South Africa
South Korea
Soviet Union [USSR]
Spain
Sri Lanka
Sudan
Syria
Tajikistan
Thailand
Turkmenistan
Turkey
Uganda
United Arab Emirates
Uruguay
Uzbekistan
Venezuela
Vietnam
Yugoslavia
Zaire

Ghana

Banking

Ghana has a well-developed banking system that was used extensively by previous governments to finance attempts to develop the local economy. By the late 1980s, the banks had suffered substantial losses from a number of bad loans in their portfolios. In addition, cedi depreciation had raised the banks' external liabilities. In order to strengthen the banking sector, the government in 1988 initiated comprehensive reforms. In particular, the amended banking law of August 1989 required banks to maintain a minimum capital base equivalent to 6 percent of net assets adjusted for risk and to establish uniform accounting and auditing standards. The law also introduced limits on risk exposure to single borrowers and sectors. These measures strengthened central bank supervision, improved the regulatory framework, and gradually improved resource mobilization and credit allocation.

Other efforts were made to ease the accumulated burden of bad loans on the banks in the late 1980s. In 1989 the Bank of Ghana issued temporary promissory notes to replace non-performing loans and other government-guaranteed obligations to state-owned enterprises as of the end of 1988 and on private-sector loans in 1989. The latter were then replaced by interest-bearing bonds from the Bank of Ghana or were offset against debts to the bank. Effectively, the government stepped in and repaid the loans. By late 1989, some ¢62 billion worth of non-performing assets had been offset or replaced by central bank bonds totaling about ¢47 billion.

In the early 1990s, the banking system included the central bank (the Bank of Ghana), three large commercial banks (Ghana Commercial Bank, Barclays Bank of Ghana, and Standard Chartered Bank of Ghana), and seven secondary banks. Three merchant banks specialized in corporate finance, advisory services, and money and capital market activities: Merchant Bank, Ecobank Ghana, and Continental Acceptances; the latter two were both established in 1990. These and the commercial banks placed short-term deposits with two discount houses set up to enhance the development of Ghana's domestic money market: Consolidated Discount House and Securities Discount House, established in November 1987 and June 1991, respectively. At the bottom of the tier were 100 rural banks, which accounted for only 5 percent of the banking system's total assets.

By the end of 1990, banks were able to meet the new capital adequacy requirements. In addition, the government announced the establishment of the First Finance Company in 1991 to help distressed but potentially viable companies to recapitalize. The company was established as part of the financial sector adjustment program in response to requests for easier access to credit for companies hit by ERP policies. The company was a joint venture between the Bank of Ghana and the Social Security and National Insurance Trust.

Despite offering some of the highest lending rates in West Africa, Ghana's banks enjoyed increased business in the early 1990s because of high deposit rates. The Bank of Ghana raised its rediscount rate in stages to around 35 percent by mid-1991, driving money market and commercial bank interest rates well above the rate of inflation, thus making real interest rates substantially positive. As inflation decelerated over the year, the rediscount rate was lowered in stages to 20 percent, bringing lending rates down accordingly.

At the same time, more money moved into the banking system in 1991 than in 1990; time and savings deposits grew by 45 percent to ¢94.6 billion and demand deposits rose to ¢118.7 billion. Loans also rose, with banks' claims on the private sector up by 24.1 percent, to ¢117.4 billion. Banks' claims on the central government continued to shrink in 1991, falling to a mere ¢860 million from ¢2.95 billion in 1990, a reflection of continued budget surpluses. Claims on nonfinancial public enterprises rose by 12.6 percent to ¢27.1 billion.

Foreign bank accounts, which were frozen shortly after the PNDC came to power, have been permitted since mid-1985, in a move to increase local supplies of foreign exchange. Foreign currency accounts may be held in any of seven authorized banks, with interest exempt from Ghanaian tax and with transfers abroad free from foreign exchange control restrictions. Foreign exchange earnings from exports, however, are specifically excluded from these arrangements.

The Ghana Stock Exchange began operations in November 1990, with twelve companies considered to be the best performers in the country. Although there were stringent minimum investment criteria for registration on the exchange, the government hoped that share ownership would encourage the formation of new companies and would increase savings and investment. After only one month in operation, however, the exchange lost a major French affiliate, which reduced the starting market capitalization to about US$92.5 million.

By the end of 1990, the aggregate effect of price and volume movements had resulted in a further 10.8 percent decrease in market capitalization. Trading steadily increased, however, and by midJuly 1992, 2.8 million shares were being traded with a value of ¢233 million, up from 1.7 million shares with a value of ¢145 million in November 1991. The market continued to be small, listing only thirteen companies, more than half in retailing and brewing. In June 1993, Accra removed exchange control restrictions and gave permission to non-resident Ghanaians and foreigners to invest on the exchange without prior approval from the Bank of Ghana. In April 1994, the exchange received a considerable boost after the government sold part of its holdings in Ashanti Goldfields Corporation.

Data as of November 1994

Ghana - TABLE OF CONTENTS

The Economy

Go Up - Top of Page

Make allRefer Reference your HomepageAdd allRefer Reference to your FavoritesGo to Top of PagePrint this PageSend this Page to a Friend


Information Courtesy: The Library of Congress - Country Studies


Content on this web site is provided for informational purposes only. We accept no responsibility for any loss, injury or inconvenience sustained by any person resulting from information published on this site. We encourage you to verify any critical information with the relevant authorities.

 

 

 
 


About Us | Contact Us | Terms of Use | Privacy | Links Directory
Link to allRefer | Add allRefer Search to your site

©allRefer
All Rights reserved. Site best viewed in 800 x 600 resolution.