Mr. Chairman,
Our Deputy Governor from the Bank of Ghana, Dr Johnson Asiamah,
Deputy Minister-designate George Andah,
My good friend Kojo Asomani of ABN,
Nana Osei Bonsu of PEF
Members of the Diplomatic Corps,
Stakeholders from the telecoms and banking sector
Captains of Industry,
Members of International Development Organisations,
Distinguished Guests, The Media, Ladies and Gentlemen.
It gives me much pleasure to join you today at the 5th edition of the prestigious EOBS event. The MC described is as the Davos of Ghana; I think that is not too far off.
The topic of the conference, “Unlocking Ghana’s potential with Mobile Money & Payment Systems” is a relevant and timely one. The role of financial inclusion in development is one that has been long recognized throughout economic history.
When you go back, in Europe in the 1700s, there were very active attempts to get financial inclusion, and the reason is simple: If you have an economy in which the majority of your population actually population is excluded from the financial system, it is the case that your savings in that financial system will be much lower.
And we all know what the role of savings in development is. If you have more savings in your financial system, then you would have more investment in the economy. More investment means more growth. More growth means lower unemployment and less poverty. And so the nexus is quite clear between financial inclusion, economic growth, poverty reduction, job creation, increased investment.
For us in the financial sector, the whole issue of interest rates and how we bring it down sustainably, has a direct relationship with financial inclusion. If you have an economy where 60-70% of your population are excluded from the financial system, structurally you should expect higher interest rates, other things being equal. The structure of the economy will deliver higher interest rates, and so financial inclusion and bringing down interest rates are actually quite linked.
The Mobile Money system, which is money transfers and payments done using the mobile phone, was first launched in Kenya by the telecom company Safaricom on 6th March 2007. Therefore, on 6th March 2017, which incidentally was the day Ghana celebrated its 60th anniversary of independence, mobile money was also celebrating 10 years anniversary of its launch.
This makes the theme of this conference significant. Mobile money today, or M-pesa, as it is called in Kenya, contributes more than 43 percent to Kenya’s Gross Domestic Product (GDP), according to the Kenyan Central Bank.
A research study by the Massachusetts Institute of Technology (MIT) shows that in Kenya, increased access to mobile money has reduced poverty, particularly among female-headed households. Rapid expansion of mobile money has lifted an estimated 2 percent of Kenyan households (approximately 194,000) out of extreme poverty.
Consequently, 185,000 have moved out of subsistence farming and into business or sales occupations, according to the MIT study. Such has been the transformative impact of mobile money in East Africa’s largest economy. Ghana Situation
In fact the whole issue of digital payments is so important. The Central bank has been pushing for a cashless society for a while. Indeed the Central bank has seen to the passing of a new Bank of Ghana Act which had specific initiatives on promoting a cashless society, a new Banking Act which liberalised the banking sector and allowed for the entry of foreign-owned banks to bring competition and banking to the doorstep of the ordinary Ghanaian.
The increased competition among banks means mobile and online banking became an increasing channel to deliver banking products to customers. Additionally, we saw the establishment of the Ghana Interbank Payments and Settlements System (GhIPSS) in 2007. GhIPSS was mandated to migrate Ghana onto an electronic payment community as part of efforts to modernise the country’s payment system.
GhIPSS has developed the ‘e-zwich’, a payment system which has grown exponentially and is being adopted by many banks. Whereas, there were only 496,000 e-zwich cards issued in 2010, there are now more than 1.8 million e-zwich card holders in the country by the end of last year, with more and more adoption rate, according to figures from the Bank of Ghana.
Also, as a way of ensuring an effective regulation and supervision of the payment sector, Parliament passed into law the Payment Systems Act, 2003 (ACT 662) for this purpose. I am aware this Act has been amended to consolidate the laws relating to payment services and to regulate institutions that carry on payment services.
Mr. Chairman, although certain sectors of the economy like agriculture and manufacturing have not been growing in the manner that government has desired, one trend that is inescapable is the huge contribution of the services sector to Ghana’s GDP.
One notable sub-sector is the telecommunications sector, driven by the mobile telecommunication companies. Where formerly, landline telephones were a luxury, the ownership of mobile phones grew among Ghanaians. Competition among Mobile Network Operators (MNOs) meant that digital financial service was just a matter of time.
In 2009, Ghana officially launched the mobile money service in the country targeted at the unbanked population. This coincided with the growth in mobile phone penetration rates in the country. At the end of 2009, Ghana had a mobile phone subscriber population of 15,100,000 and a mobile phone penetration rate of 65.9 percent, according to the National Communications Authority (NCA).
By December 2016, the total number of mobile voice subscribers had shot up to 38,300,000, because are having two or three mobile phones, representing a total penetration rate of 136.3 percent. This means from 2009-2016 (a seven-year period), mobile phone subscriptions and ownership has grown by more than 50 percent.
Mobile money in numbers
Despite the fact that banking started in Ghana about a century ago, only about 40 percent of Ghanaians have bank accounts, meaning majority of the population is unbanked. This unbanked population therefore use cash for transactions, excluding them from the formal financial system, i.e. access to savings, bank credit, mortgages, investment and other financial products. In July 2015, the Bank of Ghana (BoG) introduced new E-money Issuer (EMI) guidelines to govern the mobile money sector.
A key part of the guidelines was that banks should pay interest on the float kept by the banks on behalf of the EMIs. This I think is happening, and we must continue to urge the Central Bank to look at the regulations in this sector to try to better understand the space, so that the sector can grow and at the same time keep our financial system stable.
Government policies
Mr. Chairman, the government of Nana Akufo-Addo is pro-business, and we have made it a point that we want to build the most business friendly economy in Africa. We are, therefore keen on developing the financial sector to deepen financial inclusion and bring more Ghanaians out of extreme poverty. This informed the decision of the President to abolish the 17.5 percent VAT on financial services as announced by the Finance Minister in his budget statement to Parliament on 2nd March.
The abolition is meant to encourage the development of financial transactions and mobile money because research has proven that countries with strong financial systems also experience strong economic growth. Interoperability, or the ability of a subscriber to send money from one network to the other, should be possible in Ghana as a matter of course, as it is in other countries.
This is a very important issue, and it is an issue that all stakeholders should turn their attention to. Ghana is really a blessed country, when you look at the financial inclusion architecture in this country – the banks are there, the mobile companies are there, the Central bank and the GhIPSS, the payment architecture with e-zwich, which tries to target the unbanked.
We have an architecture that quite frankly I don’t see in any other country in Africa. We have been blessed with a major architecture which has been developed separately. What we’re lacking is interoperability. But interoperability cannot be forced on the players. There must be a sound case, and people have to see the sense in it. I therefore want to challenge the stakeholders, that making sure there is interoperability between Ghana Link which the banks are on, the e-zwich platform and the mobile telephone platforms, is not rocket science. If you put your minds to it this can be done in six months.
It can be done. I believe that GhIPSS is in a very unique position to bring the banks and the telcos together to make their platforms interoperable, so that you can transfer money between the telcos and the banks very easily. I want to challenge GhIPSS and the banks: Government would like to see us do this, this year, that we successfully have interoperability between our key players, the telcos, the banks and the payment system architecture in this country.
I want to encourage banks and mobile network operators to collaborate and increase the range of services available to customers. With many Ghanaians owning mobile phones, it offers limitless opportunities for other sectors to introduce vast majority of our citizens to financial products. Some banks now offer the ability to buy Treasury Bills using mobile money, ability to contribute to insurance products and pay bills, etc.
Fundamentally, ladies and gentlemen, what we are trying to do is to formalize the economy. Formalising this economy essentially has three pillars to it. The pillars which this government is trying to implement are 1. Financial Inclusion 2. National Identification, and 3. Property Addressing System.
If you have these three pillars, then you have the necessary backbone for a formal economy, and these are the three pillars we want attacked this year, 2017. We have been trying for the past 60 years, but I think that the benefit of technology, and the benefit of shared experiences across counties would allow us to do this, this year.
Why do I say so? For citizens to register and use mobile money and digital payment systems, they need an Identification instrument. We have several in the system. In January this year, I inaugurated a committee to start work on the country having a National ID system, under direction from the President. The government of Nana Akufo-Addo is convinced that the National ID scheme would help formalise the economy through the establishment of a national database, using the National Identification System as a primary identifier.
This is something that we as a nation have been trying to do since 2007 and we have not yet quite done it yet. We want to do so this year. The national address system is also very key. The role of an address system is usually very underestimated.
This is what I call the unwritten rules of the game. If you decide not to have an address system your competitors are not going to tell you to have one, or have a national ID system, they will let you wallow in your chaos, and this is what we have been doing, wallowing in informality, in chaos. But this year we want to do the national ID system, we want to do a digital property addressing system for Ghana.
This will allow us to leapfrog even the advanced countries in the context of addressing, so that any space in Ghana will have a unique address. I have challenged them, and by this year, we will implement a digital address system for Ghana, so every property will have a unique address.
I think if we have the digital addressing system, the national ID system, and then you have interoperability in the digital payment space, you would have dealt with the engine that is going to drive this economic transformation. Those are the unwritten rules of the game, and I think they will have a major impact as far as economic development is concerned.
When I look at the space and the possibilities and what we are capable of doing, I am really very excited about the future of Ghana. The potential is huge, we are just scratching the surface, and I believe that once we put these elements in place, digital mobile payment is definitely going to unlock the potential for Ghana.
We have the architecture in place, and we have to bring them together so that we can move forward and take advantage of it, and be that Black Star on the African continent.
THANK YOU AND GOD BLESS OUR HOMELAND GHANA
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