The lay man’s view of the nation’s financial inclusion journey

By Emmanuel AGYEMAN

It is the responsibility of every state to promote the highest level of economic development while safeguarding the welfare, freedom, and happiness of all its citizens. A key factor in achieving these goals is financial inclusion, which is essential for sustainable development and the equitable distribution of economic benefits.

In Ghana, significant efforts have been made over the years to implement policies and initiatives aimed at ensuring that every citizen, regardless of their social or economic background, has access to financial services.

This article therefore seeks to assess the country’s financial inclusion journey so far from the perspective of the everyday citizen. It will also discuss the challenges and proposes actionable strategies to fully realize comprehensive financial inclusion, which is fundamental to advancing the nation’s broader development objectives.

What is financial inclusion?

According to the Ghana Financial Inclusion Report 2022, financial inclusion refers to a state where individuals and businesses have access to affordable and practical financial products and services that meet their specific needs, such as transactions, payments, savings, and insurance.

In essence, it involves the equitable and transparent provision of banking services and financial activities at an affordable cost and structured around three key dimensions: Access, Quality, and Usage.

The first dimension, ‘Access’, evaluates the extent to which individuals and businesses can engage with formal financial services while the second, ‘Quality’, focuses on the reliability, effectiveness, and suitability of these services in meeting user needs.

Lastly, the ‘Usage’ dimension examines how actively individuals and businesses utilize formal financial services in their daily activities. Together, these dimensions provide a comprehensive framework for understanding the scope and impact of financial inclusion efforts.

The target beneficiaries are classified into four main groups – banked, other formal (non-bank), informal, and excluded. The ‘banked’ category includes individuals who save or receive credit from universal or rural banks and use banking channels for financial transactions, such as debit, current, or credit cards.

‘Other formal (non-bank)’ refers to those who save or receive credit from cooperative societies, credit unions, microfinance institutions, or pension fund administrators, and also use mobile money or remittance systems.

The ‘informal’ category involves individuals who rely on informal savings groups, unregulated lenders, or informal remittance agents. And the ‘excluded’ category includes people who are not directly engaged with any formal or informal financial services, instead relying on others who have access to these services.

Ghana’s financial inclusion journey

Ghana’s financial inclusion journey has been characterized by several key milestones and strategic initiatives aimed at expanding access to financial services across the country.

The introduction of mobile money in 2009 marked Ghana’s first major financial inclusion initiative. Spearheaded by MTN Ghana, mobile money provided an accessible and convenient way for individuals, particularly those in rural areas, to conduct financial transactions without the need for a traditional bank account. It revolutionized financial services by enabling users to send and receive money, pay bills, and access other financial services using their mobile phones.

This initiative significantly expanded financial access across the country, laying the foundation for broader digital financial services and accelerating the country’s financial inclusion efforts.

The impacts of these transformative investments were validated in 2010 with the FinScope Survey, a survey which assessed the level of financial inclusion in the country, mapping the access landscape for financially included individuals, and identifying the barriers to the use of financial products and services.

The results revealed that 56percent of adult Ghanaians (18 years and older), or 7.5 million people, were financially included, while 44percent, or 5.9 million, were excluded. It further broke down financial inclusion by category: 41percent (5.5 million people) were formally included, 34percent (4.5 million) were banked, and 20percent (2.7 million) used non-bank formal financial products and services.

Also, the survey highlighted overlaps in product usage, indicating that many banked individuals found their banking products insufficient, and one-third of formally served individuals still turned to the informal sector to meet financial needs or gain additional non-financial benefits.

Subsequently, the 2014-2015 Financial Inclusion Insights Survey was also conducted to monitor access to and demand for financial services, as well as the adoption and use of digital financial services (DFS).

The survey found that 48percent of adult Ghanaians held financial accounts, with 34percent having bank accounts, 20percent registered for mobile money, and 8percent using non-bank financial institution accounts (excluding credit-only services). Additionally, 41percent of Ghanaians had digital access to their financial accounts.

Despite this, Ghana had the lowest mobile money registration rate (23percent) among the five Financial Inclusion Insights countries in Africa highlighted in the survey (Kenya, Tanzania, Uganda, Rwanda, Ghana), but it had the highest rate of registered bank accounts (34percent).

The survey noted that while Ghana has significant potential to expand its DFS market, a major challenge remains the heavy reliance on personal delivery of cash.

Along the line also came the 2018-2023 National Financial Inclusion and Development Strategy (NFIDS), which was created to support Ghana’s vision of expanding access to affordable, quality financial services for all.

Aiming to increase financial access from 58percent to 85percent by 2023, the strategy focused on marginalized groups. It outlined five key pillars: Financial Stability, Access and Usage, Financial Infrastructure, Consumer Protection, and Financial Capacity.

These pillars aimed to create a stable financial sector, promote innovative financial products for excluded populations, improve service delivery, enhance borrower information, and build consumer confidence and financial literacy.

Another important initiative was the Digital Financial Services Policy (2020-2023) which complemented the above-mentioned NFIDS by establishing a roadmap for creating a resilient, inclusive, and innovative DFS ecosystem.

It aimed to provide affordable and transparent digital financial services through six key action areas: governance, regulation, capacity building, infrastructure, digital payment use, and FinTech support. The policy encouraged collaboration to address risks and foster innovation in the DFS space.

Other key initiatives and programmes include the Cash Lite Road Map (2021) which focused on shifting Ghana from cash to digital payments through a three-phase plan to develop an inclusive digital payments ecosystem.

The Demand Side Survey (2021) reported progress on financial inclusion, showing that 95percent of the population had access to financial services, with a 40percent reduction in financial exclusion. The survey also revealed differences in financial access by urban and rural areas, and between genders.

Finally, the Ghana Financial Inclusion Report (2022) highlighted improvements in formal financial account access, with 61.05percent of the population having accounts, up from 40.68percent in 2018. Among adults (15 ), 94.34percent had formal accounts, compared to 62.86percent in 2018.

Various quality, usage, and access indicators contributed to Ghana’s Financial Inclusion Index, which stood at 52.76percent.

Ghana’s financial inclusion journey from the lay man’s perspective

From the lens of the ordinary Ghanaian, Ghana’s journey towards financial inclusion has been nothing short of transformative. For many ordinary Ghanaians, this evolution means that financial services, once seen as a privilege reserved for those near urban centers or with technical expertise, are now accessible to nearly everyone, including those in the most remote villages.

The introduction of mobile money in 2009, in particular, has revolutionized how people handle their finances, making banking services available at the touch of a button and bringing a sense of financial empowerment to individuals who previously felt excluded from the formal financial system.

By 2023, mobile money transactions exceeded a trillion dollars, highlighting its widespread adoption and impact.

Further, the rise of FinTech companies, with over 100 in Ghana, has further boosted financial inclusion. These companies provide integrated mobile payment services that cater to both banked and unbanked populations, enhancing customer convenience and experience.

Supportive regulations and policies have also been pivotal. The Payment Systems and Services Act, 2019 (Act 987) and various directives from the Bank of Ghana have also created a robust framework for digital financial services, guiding the implementation of financial inclusion strategies.

Despite these advancements, challenges remain. Low financial literacy and a focus primarily on access rather than the quality and usage of financial services hinder the full realization of financial inclusion. Addressing these issues is therefore crucial for achieving comprehensive financial integration across Ghana.

Recommendations for deepening financial inclusion in Ghana

First, in order to fully achieve financial inclusion in Ghana, an integrated approach is necessary, addressing not only access but also the quality and usage of financial services.

This involves developing new policies that set clear guidelines for improving the effectiveness and accessibility of financial products. Collaboration with financial institutions will be key to developing solutions that meet the needs of all users.

Further, the government should make it a point to partner with FinTech companies, NGOs, CSOs, and other financial service providers to conduct outreach programmes aimed at increasing financial literacy in both urban and rural areas.

These programmes should educate the public about financial systems, including how to recognize and avoid financial scams, mobile money fraud, and Ponzi schemes.

Finally, whilst it is greatly appreciated that Ghana has established regulatory frameworks for financial and digital payment services, improved and strengthened regulation is crucial.

The government must continually monitor and adjust these regulations to mitigate systemic risks, protect consumers from abuse, and uphold their confidence in financial services. This will help prevent disillusionment with financial products due to past negative experiences.

Conclusion

In summary, this article has explored Ghana’s progress in achieving financial inclusion, incorporating viewpoints from the general public and outlining strategies to reach a comprehensive state of financial inclusion.

Financial inclusion is essential for the advancement of any growing economy, and Ghana has made notable progress in this regard. However, to fully realize this goal, it is imperative for Ghana to identify and address existing gaps that impede financial inclusion.

A holistic approach must be adopted, focusing on enhancing all facets of financial inclusion to ensure that every individual benefits from accessible, high-quality financial services.

>>>the writer is Legal Intern at Sustineri Attorneys PRUC (www.sustineriattorneys.com) a client-centric law firm specializing in legal services for Startups and Technology-enabled companies. He is also a student of the UPSA Law School.

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