Banks Must Cut Costs, Broaden Access

Banks in Africa can reduce operational cost and broaden access to their services if they step-up efficiency and use appropriate technology, Deputy Governor of the Bank of Ghana Millison Narh has said.

He noted that even though the continent has made progress in strengthening its banking and financial systems, as well as access to financial services, teething challenges still remain.

“Banks may employ branchless banking in general and mobile money in particular, which are less expensive means of extending financial services. There is no doubt that evolving a cost-effective banking system that promotes access will address some of the challenges to banking penetration in our region,” he said.

“The barriers to account ownership have been identified to include low incomes, distance to service providers (bank branch or access point), and lack of appropriate documentation for account opening.”

Mr. Narh was addressing members of the World Savings Banks Institute (WSBI) at the 19th African Regional Group Meeting under the theme “Innovation in Products and Delivery Channels to Face the Competition”.

The meeting gave African member-banks the opportunity to discuss recent developments in their respective institutions and markets, re-launch discussions regarding WSBI Africa Working Groups, and brainstorm on implementation of the WSBI Charter of Responsible Business.

The World Bank has estimated that in 2011 while private sector credit to GDP averaged 39 percent for North Africa and 77 percent for all other developing economies, it was 24 percent for sub-Saharan Africa. The comparative figure for high-income countries is 172 percent.

Furthermore, while only 23 percent of adults in Africa have a bank account, the comparative ratio is 89 percent for high-income countries and 55 percent for the East Asia and Pacific regions. Within Africa, the ratio ranges from 11 percent in Central Africa, to 23 percent in West Africa, and 51 percent in Southern Africa — indicating uneven progress.

Managing Director of the WSBI, Chris De Noose, said the African banking landscape is in a vibrant stage with the emergence of successful new actors now competing with traditional local banks. “Innovative information and communication technologies related to the delivery models of financial products could be seen as key drivers for these successes.

It is widely agreed that information and technology have been the catalyst for African countries to leapfrog the technology frontier and directly address financial inclusion.” He noted that the majority of WSBI African membership is still facing challenges to capture the accrual role of innovation in their own national banking systems.

“We can mention mainly the lack of support from authorities, in terms of necessary institutional changes and capital increases, the high cost of investment in new technologies and marketing, and regulatory constraints that restrict the provision of certain key services such as credit or access to payments and clearing systems.”

Managing Director of HFC Bank Asare Akuffo said the bank is the only Ghanaian member of the WSBI, and has remained the leading retail and SME banking institution in the country. “The importance we place on our relationship with WSBI is premised on our belief that retail and savings banks form the bedrock of the financial systems of our economies. The stable retail deposits that we hold are the lifeblood of banking.

“We are of the view that our countries must endeavour to maintain a strong presence of local banks as we open our markets to the participation of larger institutions from abroad. This is the time for soul-searching by our politicians and economists. The continent is positioned as the next frontier for rapid economic growth, but that expected growth must be mutually beneficial to both local and foreign investors.”