Government support & fast growth of Ghana's economy drive development in the Cards market
Webteam: 10th March 2014 12:16pm
Ghana is a predominantly cash-based economy; the consumer credit market is in its infancy for the vast majority of the population. However, Ghana's consumer credit market has seen impressive growth rates, spurred on mainly by an emerging middle class on the back of the country's oil-driven economy.
Lafferty Group can reveal that significant progress is being made in the development of consumer finance in Ghana. The government and the financial services sector have introduced models to reach the unbanked and low-income segment at affordable prices. Banking infrastructure in both the urban and the rural settlements has seen greater improvement, with 27 retail banks in operation at the end of 2012 with a combined branch network of 811 — compared to just 392 branches in 2005.
In the payments sector, the government has been proactive, introducing a national payment and settlements system that created an electronic clearinghouse for all banking and financial institutions in 2008, as well as Africa's first biometric electronic payment system: the e-zwich card. The e-zwich platform is part of a major project to address the large unbanked population in the country and lack of interoperability.
In 2012 there was an estimated 1.4 million cards in Ghana, of which 6,000 were credit cards, 550,000 debit cards on international networks and 792,966 were e-zwich biometric prepaid cards on the national e-zwich platform. Existing credit cards are targeted at high net-worth individuals with verifiable sources of income. These credit cards are predominantly issued as foreign-currency cards designed for international usage and therefore have been traditionally out of reach for the majority of Ghanaians.
Ghana's consumer credit market has been spurred on mainly by an emerging middle class propelled by the growth of the country's economy: nearly one in five Ghanaians, or 4.6 million people, are now either lower or upper middle class. (This is based on the Agricultural Development Bank of Ghana's definition of a per capita daily consumption of between $4 and $20.) The low-income segment is excluded from accessing credit due to stringent eligibility criteria, lack of an addressing system, inadequate collateral and inability to demonstrate dependable income.
Traditionally, this low-income segment has been served by over 260 active microfinance institutions. Microfinance institutions had a total of 300,878 active borrowers in 2012. In the medium- to long-term Lafferty expects an increase in the number of Ghanaian consumers and small businesses that will enter the formal banking system.
Analysis conducted by Lafferty Group shows that Ghana has just 30 percent of the adult population banked. With the government aggressively promoting cards and electronic payments there is considerable potential for growth in the Ghanaian payments market. The challenge is finding service models to reach the unbanked and low-income segment at affordable prices.
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