It is emerging that the lack of growth and competitiveness in Ghanaian local indigenous banks is partly a result of governmental ownership which leads to excessive interference in the business operations of the banks.
Former President of the Ghana Association of Banks (GAB), John Kofi Adomakoh argues that the local banks are not able to grow, expand, and travel outside the shores of Ghana as done by Nigerian banks due to the excessive role of the government.
In an interesting revelation, John Kofi Adomakoh indicated that local banks with the government as majority shareholder are often coerced into lending to State-Owned Enterprises (SOEs).
This practice, he says, has locked them into high-risk financial commitments that hinder their expansion. Unlike their foreign-owned counterparts, Ghanaian banks struggle to diversify and expand beyond the country’s borders, largely due to government influence and poor governance structures.
Adomako stressed that for Ghana’s banking sector to thrive, the government must reduce its ownership stake in these institutions, allowing for greater private sector participation that enhances governance and efficiency.
Speaking at the Ghana Association of Banks Cocktail and Networking Event, the former President said, “And let’s not hide,” Adomako stated candidly. “These banks are coerced to lend to SOEs. All of these things happen because local, indigenous Ghanaian banks have come under pressure to lend to SOEs and get stuck in that type of business.”
“It’s not the business of governments to have shares in banks. Government can have a smaller share, but allow the private sector. It improves the governance in the institution. And once the governance is improved, the bank also grows better and does things better,” he added.
Ghana’s banking sector, especially state-owned banks, has faced turbulent times in recent years, with local banks struggling to meet capital requirements and suffering from non-performing loans linked to state-owned enterprises.
Experts argue that excessive governmental involvement has weakened decision-making processes, increasing financial risks and limiting competitiveness.
Allowing indigenous banks to operate without undue political interference, John Adomako believe will be is crucial to unlocking their full potential and positioning them as key players in Africa’s financial ecosystem.
But will the government heed to this advice? Only time will tell.
