Manifesto Digest with Korsi DZOKOTO: Reviving indigenous participation the banking sector(2)

…Mahama’s Strategic Plan

John D. Mahama’s manifesto for the 2024 general election lays out a comprehensive vision to promote indigenous participation in Ghana’s banking sector. The current state of the industry highlights the dominance of foreign-owned banks, with only 9 out of 23 banks being indigenous, controlling less than 40% of total industry assets.

This marginalization of local banks, compounded by the Domestic Debt Exchange Programme (DDEP) and the ongoing economic challenges, calls for urgent interventions to strengthen the indigenous banking sector. Mahama’s proposed policies focus on recapitalizing indigenous banks, empowering local talent, and ensuring a more inclusive financial landscape that prioritizes local ownership and supports economic growth.

Promoting Indigenous Participation: A Pathway to Economic Sovereignty

Mahama’s plan to promote increased indigenous participation in the banking sector is centred on creating opportunities for local banks to play a larger role in the country’s financial system.

With only 39.6% of total industry assets under the control of indigenous banks, the need for intervention is critical. These banks face stiff competition from their foreign counterparts, many of which have greater financial resources and access to international markets.

The NDC’s strategy involves promoting local ownership and empowering indigenous banks to compete effectively in the market. By establishing policies that prioritize local talent and indigenous institutions, the NDC aims to build a robust banking sector that is rooted in the Ghanaian economy.

This will not only create jobs for Ghanaians but also ensure that profits generated within the banking sector are reinvested in the local economy, contributing to national development.

Recapitalizing Indigenous Banks: Establishing an Equity Fund

One of the cornerstone policies of Mahama’s banking sector reform is the establishment of an Equity Fund to aid the recapitalization of indigenous banks. The DDEP has had a profound impact on the financial stability of local banks, many of which have seen a significant erosion of their capital due to the restructuring of domestic debt.

To address this, Mahama proposes the creation of an Equity Fund that will provide much-needed financial support to indigenous banks, enabling them to recapitalize and rebuild their balance sheets.

This fund will serve as a lifeline for local banks that are struggling to meet capital requirements. By strengthening the capital base of indigenous banks, the NDC aims to enhance their competitiveness and ensure that they can continue to serve the needs of the Ghanaian economy. Additionally, the Equity Fund will help to restore confidence in local banks, encouraging both domestic and foreign investors to engage with Ghana’s financial system.

Reviewing the Withdrawal of Banking Licenses and Ensuring Fair Arbitration

The NDC has been critical of the NPP government’s banking sector clean-up, which saw the withdrawal of banking licenses from several indigenous financial institutions. Mahama’s manifesto proposes a review of these decisions, with the goal of implementing fair arbitration to restore trust in the financial system.

Many indigenous banks were forced to close their doors, leading to widespread job losses and a decline in local participation within the sector.

By reviewing these license withdrawals, the NDC seeks to provide an opportunity for banks that were unfairly targeted to re-enter the market. This will also open doors for experienced bankers who lost their jobs during the clean-up to return to the industry, bringing with them valuable expertise and knowledge.

Fair arbitration will not only restore trust but also ensure that the regulatory framework is applied equitably, promoting a level playing field for both local and foreign banks.

Strengthening Corporate Governance and Regulatory Oversight

Another key aspect of Mahama’s vision for the banking sector is the enhancement of the regulatory and supervisory framework. The NDC acknowledges that stronger corporate governance and financial stability are essential for building a resilient banking system. Indigenous banks, in particular, will benefit from improved oversight that ensures they operate efficiently and transparently.

Mahama’s administration plans to work closely with regulatory bodies such as the Bank of Ghana to establish more robust governance structures that promote accountability and mitigate risks within the banking sector.

By strengthening regulations, the NDC seeks to prevent the recurrence of issues such as mismanagement and insolvency, which have plagued the industry in recent years. A stable regulatory environment will foster investor confidence and support the long-term growth of indigenous banks.

Revamping the Specialized Deposit-Taking Institutions (SDI) Sector

In addition to focusing on indigenous banks, Mahama’s manifesto highlights the importance of revamping the Specialized Deposit-Taking Institutions (SDI) sector. SDIs, which include savings and loan companies, rural banks, and microfinance institutions, play a vital role in providing financial services to underserved communities and supporting small and medium-sized enterprises (SMEs). However, many of these institutions have faced significant challenges, including insolvency and poor governance.

The NDC proposes a comprehensive review of the regulatory frameworks governing SDIs to ensure that they are subject to efficient supervision and capable of contributing to a stable and resilient banking sector.

Consolidating the SDI sector will allow these institutions to better support SMEs, which are the backbone of the Ghanaian economy. By providing targeted financial services to small businesses, SDIs can help drive economic growth and job creation, particularly in rural areas.

Addressing the Issue of Insolvent Microfinance Institutions

The collapse of numerous microfinance institutions (MFIs) during the banking sector clean-up has left a significant portion of the population without access to essential financial services.

Mahama’s administration plans to address the residual issues from this clean-up by implementing policies that support the recapitalization and restructuring of insolvent MFIs. This will ensure that rural communities and smallholder farmers, who rely heavily on microfinance, continue to have access to credit and other financial services.

Reviving the MFI sector is critical for promoting financial inclusion, particularly in rural areas where traditional banks may not have a presence. By addressing the challenges faced by MFIs, the NDC seeks to promote a more inclusive banking system that serves all Ghanaians, regardless of their location or socio-economic status.

Promoting Financial Inclusion and Supporting Rural Communities

Financial inclusion is a key theme in Mahama’s manifesto, and the NDC is committed to increasing access to financial services for rural communities and smallholder farmers.

By promoting financial inclusion, the NDC aims to create opportunities for rural populations to access credit, save, and invest in their businesses. This will have a positive impact on rural development and help bridge the gap between urban and rural areas in terms of access to financial services.

The NDC’s plan includes promoting financial literacy and working with financial institutions to develop products that cater to the needs of rural communities. By fostering a more inclusive financial system, Mahama’s administration will empower individuals and businesses in rural areas to participate more fully in the economy, contributing to national growth and prosperity.

Conclusion

John D. Mahama’s vision for promoting indigenous participation in the banking sector represents a significant shift towards a more inclusive and resilient financial system. By supporting the recapitalization of indigenous banks, strengthening regulatory oversight, and promoting financial inclusion in rural areas, the NDC aims to build a banking sector that is rooted in the Ghanaian economy and serves the needs of all its citizens.

These reforms will not only promote economic growth but also restore confidence in the financial system, ensuring a brighter future for Ghana’s banking industry.

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