Financial institutions in Ghana have been advised to improve their data gathering processes to avoid incurring bad loans in order to channel funds into the economy.
A Bank of Ghana report, released in March this year indicated that the banking industry recorded a negative growth of 5.4 percent in 2015, due to many challenges which included bad credit.
Speaking to Citi Business News at the launch of his book, “Financial Markets and Institutions, A Frontier Market Perspective”, the Dean of the University of Ghana Business School(UGBS), Professor Joshua Yindenaba Abor explained that, even though there is a Credit Reference Bureau in the country, information asymmetry in the financial sector is still on the rise.
“The information environment is not strong enough. We think that there is high default because financial institutions don’t have enough information about borrowers and when you don’t have sufficient information about borrowers, you are likely to make mistakes,” he said.
According to him, viable business operators have been refused credit by banks, while unprofitable ventures have received funds leading to bad loans.
Prof. Abor disclosed that the challenge is not restricted to only the banks, but also prevalent in the capital and mortgage markets.
He explained that in the mortgage market, unsuspecting customers have been caught in transactions that were not properly explained to them due to lack of information.
Touching on how his book will help address some of the issues, Prof. Abor stated that the book specifically tackles the challenges in a pragmatic way, using local dynamics.
“Financial market is a very interesting area. I have been teaching the course since 2004. I noticed that most of the text books around focus on developed markets like the US market, but our market is confronted with different challenges that need serious addressing,” he said.
He stated that the book combines theory with practical findings to allow both students and financial players use it in various fields.
Pointing out some challenges in the stock market that the book addresses, Prof. Abor stated that the book attempts to answer why financial players are unable to offload or sell stocks due to high illiquidity.
He added that the book also looks at why Ghana’s bonds market does not have institutional investors.
Some financial players who attended the programme included Alhassan Andani, MD of Stanbic Bank, Dr. Kwame Baah Nuakoh, Senior Vice President, Marketing Research and Corporate Affairs at the Royal Bank, Dr. K.K Sarpong , Board Chair of Royal Bank, and Professor Peter Quartey, Head, Department of Economics, University of Ghana.
The rest included Mr. Ekow Afedzie , Deputy Managing Director, Ghana Stock Exchange, Major M.S Tara, Chief Director Ministry of Finance, and Dr. Michael Agyekum Addo, CEO of KAMA Group of Companies.
Autographed copies of the books were sold at the launch.
By: Lawrence Segebfia /citibusinessnews.com/Ghana