2016 Ghana Banking Survey How to win in an era of mobile money August 2016 www.pwc.com/gh Contents A message from our CSP 2 A message from the Executive Secretary of Ghana Association of Bankers 4 Comments on 2016 Ghana Banking Survey 6 A message from our Tax Leader 8 1 How to win in an era of mobile money 10 2 Overview of the economy 26 3 Overview of the banking industry 32 4 Quartile analysis 36 5 Market share analysis 48 6 Profitability and efficiency 56 7 Return to shareholders 64 8 Liquidity 68 9 Asset quality 74 A List of participants 77 B Glossary of key financial terms, equations and ratios 78 C List of abbreviations 79 D Our profile 80 E Our leadership team 84 PwC 2016 Ghana Banking Survey 1 A message from our CSP for consumer banking. Besides, it offers in designing a practical and forward huge cheap deposits that banks could looking regulation that will streamline use to create money in the economy. It operations in the mobile money market. is against this backdrop that we focused This will require extensive consultation this year’s banking survey on “How to win locally and leveraging the experience of in an era of mobile money”. other countries such as Kenya that are advanced in the delivery of the service. Unlike the 2015 banking survey that sought responses from bank executives In addition to regulations and as well as bank customers, this year’s partnerships, the other critical success survey was based on responses from factors which we discussed with bank bank executives only. The intention executives were technology, network was to understand from the perspective reach and product offerings. While of bankers the extent to which mobile generally most interviewees believe money is expected to affect their that these factors are highly important, business. Additionally, we sought to product offering received a relatively Vish Ashiagbor understand the importance bankers low rating. This is because the executives attach to critical success factors in believe that mobile money product Country Senior Partner the delivery of mobile money service. offerings can be easily replicated across We obtained the responses primarily service providers. Service offerings through questionnaires and followed up themselves will therefore not be a game with interviews to further understand changer for providers, but rather the way the context of each response. the product is delivered to consumers is what is expected to be a differentiating even years after the launch of the We gathered from our survey that while factor. first mobile money solution in bankers perceive mobile money as an Ghana, the service can be said to opportunity to be explored, especially in Details of our survey have been be a game changer in the country’s the consumer banking segment, it is also presented in our survey report. For Sfinancial services industry. From a perceived as a potential threat if non- banks and telcos willing to strategically humble start in 2009, mobile money banks are allowed to provide the service position themselves to win in this era solutions now account for cash flows in competition with traditional banking of mobile money, this survey report is a that compare with aggregate deposits services. The services offered on the must read as it sheds light on the issues of commercial banks in the country. mobile money platform include inland that matter. If you wish to discuss some A recent Bank of Ghana publication remittances, bill payment as well as point of these findings in some more detail, indicated that the value of mobile money of sale payments for services offered do not hesitate to get in touch with us; transactions in 2015 was GH¢35.4b, up in restaurants and items purchased in our survey team and Financial Services from GH¢11.2b in 2014. Clearly, this certain shops. These functions were Industry Group will be pleased to engage shows a meteoric rise that evidences traditionally offered by banks, often at with you further. the acceptance of the service and a charge whereas mobile money enables demonstrates its relevance in attaining a these same transactions at a lower cost. cashlite economy in Ghana. Of course, we Bank executives believe that this serves expect other electronic payment systems as a direct threat to the sustainability to emerge to complement mobile money of similar services offered by banks and if our economy is to attain a cashlite could affect performance of the banking status. industry, which is a critical partner in the development of any economy around the While mobile money in Ghana so far world. In light of this, bank executives has been mainly driven by mobile propose that the upcoming mobile network operators, we note that it has money regulations being designed by required the partnership of banks and Bank of Ghana should engender close it is expected to significantly impact on collaboration between telcos and banks banking in coming years as it is helping to in the delivery of mobile money services. address one key concern of Government Most bank executives interviewed rated and bankers: financial inclusion. With Regulation and Partnership as key critical millions of subscribers across the success factors. PwC believes that the country, mobile money is expected to onus to create a vibrant mobile money serve as an important delivery channel industry lies primarily with the Regulator PwC 2016 Ghana Banking Survey 2 A message from our CSP PwC 2016 Ghana Banking Survey 3 A message from the Executive Secretary of Ghana Association of Bankers banking, insurance and other financial • Convenience; products, playing an important role • Easy accessibility; in extending financial services to the unbanked and underserved population. • Smaller transaction thresholds; and Participants in the industry claim it • New employment opportunities. is fast, simple, convenient, secure and affordable. The key participants Challenges associated with mobile include, telecommunication companies, money include: partnering banks or financial institutions or any other duly registered e-money • Network instability; issuers, agents of these e-money issuers • Fee considered high by some users; and users of the service. The service is either “bank-led” or “telecom-led”, a • Transaction limits imposed by the distinction cited as one of the crucial Regulator; factors contributing to the failure or • Transparency in sharing of returns success of this service in other parts of accruing on the floats; and the world where it has been deployed. D. K. Mensah • Liquidity of agents in meeting some transactions. Executive Secretary, Ghana Association In Ghana, the service is regulated by of Bankers Bank of Ghana (“BoG”), exercising its powers under Section 51 (A) (3) of the Mobile money experience he level of awareness and trust Banking Act, 2004 (Act 673) and Section in Africa so far exhibited by participants 4 (1) (d) and (e) of the Bank of Ghana in the mobile money industry Act, 2002 (Act 612) in line with BoG’s The Kenya and Nigeria experiences with especially those in the informal mandate to promote and supervise mobile money readily come to mind. Tsector who account for the larger electronic and other payments, funds proportion of the unbanked Ghanaian While the service in Kenya was mainly transfer, clearing and settlement systems telecom-led and is widely acclaimed to population gives hope that mobile under the Payment System Act 2003 (Act money operations will deepen financial be successful due to the high penetration 662). In July 2015, BoG issued guidelines of Safaricom, a local telecom operator, inclusion. It is in view of this that the for E-Money Issuers which replaced Ghana Association of Bankers welcomes the service in Nigeria was rather bank- the previous guidelines for branchless led. The Nigerian Central Bank’s this year’s PwC Ghana banking survey banking. The National Communications protectionist stance aimed at avoiding theme “How to win in an era of mobile Authority (“NCA”), the regulator of the money laundering and concerns about money”. The survey explores the telecoms sector also played a key role in loss of control largely influenced opportunities and challenges mobile issuing the new guidelines. money brings to the Ghanaian banking Nigeria’s approach to mobile money. The industry and is expected to help banks success of M-PESA, the mobile money align their operations, systems and Benefits, obstacles and platform used in Kenya is attributed strategies to better position themselves challenges to investment made in infrastructure to win in this era of mobile money. by Safaricom, training provided to the While market participants of mobile agents, awareness created about the Mobile money: money attribute a number of benefits service, demographic variables (many to the service, they also identify some high income earners concentrated in Participants and challenges. the cities with dependents living back regulatory environment in villages boosting the need for fund Benefits associated with mobile money transfers/remittances) and the low Mobile money is a way of transferring include: level of regulation at the growth stage, money, making payments and initiating facilitating market innovation. • Shorter transaction time; other transactions using a mobile phone and other mobile devices. It is • Lower transaction cost; In Nigeria, however, the mobile money seen as an opportunity to cross-sell • Improved security; business seems to be more legislated PwC 2016 Ghana Banking Survey 4 and the telecommunication companies deepening of financial inclusion via helping reduce interest cost as compared restricted in providing the needed mobile money. Usage of card based to mobilizing these deposits from infrastructure. Given that mobile money products and services offered by banks is traditional corporate institutions which typically targets lower income earners not widespread in Ghana. This, coupled demand higher returns.