THEORETICAL FRAMEWORK AND CONCEPTUAL DEVELOPMENT
4.5 Research Context
Ghana has a well-developed banking system that was used extensively by previous governments for financial purposes and attempts to develop the Ghanaian
economy. Before the establishment of the banks owned by Africans in Ghana, there were two major colonial banks. One was the Standard Chartered Bank (known as the Bank of British West Africa) and has been operating in Ghana since 1896, while Barclays Bank (known as the Colonial Bank) is in the ninety-eighth year of its operations in Ghana. In 1953 the Bank of the Gold Coast (now Bank of Ghana) was set up by the British colonizers. Later the bank was divided into two: the Bank of Ghana, operating as the bank of issue, to be developed into a complete central bank;
and the Ghana Commercial Bank, to be developed into the largest commercial bank with a monopoly on the accounts of public corporations.
When Ghana gained independence in 1957, the government established more banks. The banks incorporated by legislation between the periods 1957to 1965 included: the Ghana Investment Bank as an investment banking institution; the Agricultural Development Bank for the development of agriculture; the Merchant Bank for merchant banking; and the Social Security Bank to encourage savings. In conformity with the economic policy at the time, all of these institutions were incorporated as state-owned banks. By early 1966, it became clear that the country was experiencing economic difficulties that led to a change of government. In 1983 an attempt was made to reverse the situation. Therefore, the government, with the assistance and guidance of the International Monetary Fund (IMF), introduced the Economic Recovery Programme (ERP).
In the banking sector, Anin (2000) indicated that by the end of the 1980s the banks had suffered substantial losses from a number of bad loans in their portfolios.
Added to this was the depreciation of the Ghanaian currency, which raised the banks external liabilities. In order to rekindle the Ghanaian banking industry, the government in 1989 initiated comprehensive reforms. First, the amended banking law of August 1989 required banks to maintain a minimum capital base equivalent to six percent of net assets adjusted for risk and to establish uniform accounting and auditing standards (Anin, 2000). Second, the amended law introduced limits on risk exposure to single borrowers and sectors. Of importance is that the reform strengthened the Central Bank’s (Bank of Ghana) supervision and regulation over the commercial banks. This gradually improved resource mobilisation and credit allocation (Anin, 2000).
These newly-adopted concepts were incorporated into legislation, particularly as regard banking, non-banking financial institutions, and securities. Thus, the Banking Law was enacted in 1989, enabling suitable locally-incorporated bodies to file applications for licenses to operate as banking institutions. Subsequently, a number of corporate entities were licensed to operate as banks, including Barclays Bank of Ghana and Standard Chartered Bank of Ghana, Meridian (BIAO) Trust Bank, Merchant Ban, Allied and Metropolitan, and ECOBANK. These commercial banks placed short-term deposits with two discount houses set up to enhance the development of Ghana’s domestic money market: Considered Discount House and Securities Discount House, established in November 1987 and June 1991 respectively. At the bottom of the tier were some one hundred rural banks which accounted for only five percent of the banking system’s total assets (Anin, 2000).
The past few years have seen phenomenal growth in the Ghanaian banking sector. Currently, the Bank of Ghana has licensed twenty-seven banks to operate in the country. In addition the 27 banks, the sector also comprise a range of non-bank financial institutions, including several community banks established to mobilize rural savings. The ARB Apex Bank is the umbrella bank for Rural Community Banks and supervises 123 such banks throughout Ghana. The banking sector has seen growth in the level of private ownership, either directly or through the capital market. The entrance of new banks in Ghana has made the citizens to have access to banking services which they were previously denied by the colonial banks. With the increasing use of technology, all banks in Ghana have rolled a number of services such as VISA electronic debit card, internet banking, smartcards, and mobile phone banking. In fact, the banking sector in Ghana has become one of the innovative, resilient and competitive sectors in the country.
Significantly, whereas Ghanaian politicians have field in integrating the economy on the political front, the financial sector is moving closer to full integration.
The banks are leading in the economic integration of Ghana. The entry into the financial sector by these banks has stimulated the economic growth of the country by providing employment for many people. Above all there is a healthy competition and any bank that wobbles will definitely loose out. The once exploited and abused Ghanaian consumer is now the beneficiary of these new developments in the financial
sector. Obviously, the role played by the banking sector in economic development and the increasing competition in the sector gives an indication that TM in the sector will not only help banks to grow but to help citizens as well and will contribute to national development. For ethical purposes, the names of the three public commercial banks in this study will not be mentioned explicitly. Hence, they will be represented by pseudo names as Bank A, B, and C.
“Bank A” started in 1953 and was renamed after 1957 to focus on commercial banking services. It has the widest network in Ghana. It was wholly-owned by the Government of Ghana until 1996. Currently, government ownership stands at 21.4 percent while institutional and individual holdings add up to 78.6 percent. From one branch in the 1950s, the bank now has over 160 branches and 11 agencies throughout the country as of 2014. The bank was founded in 1953 with 27 employees, but today the bank employs a staff of 2,315 in the branches distributed in all of the 10 regions of Ghana (Ghana Commercial Bank, 2014). In 2014, the bank’s profit before tax stood at GHC 394,981 as compared to GHC 317,059 in 2013; total assets were GHC 4,259,102 as compared to GHC 3,404,826 in 2013; shareholders’ funds were GHC 689,371 as compared to GHC 466,065 in 2013; customers deposits were GHC 3,074,821 as compared to GHC 2,624,975 in 2013; total loans and advances were GHC 1,240,577 as compared to GHC 960,707 in 2013, while the number of ATM was 215 as compared to 151 in 2013.
The bank provides a wide range of products and services for the benefit of its customers including current/savings accounts, link2home for Ghanaians resident abroad, loans and overdraft, investment products, internet banking, royal banking, inland express money transfer, kidistar and trust account, business account, SME solution and MasterCard, among others (GCB, 2014). In order to ensure that the bank achieve these and other critical objectives, it has remarkably and painstakingly put together human resource system and has remain committed to attract and retain senior skilled and empowered executives and management with specific skills that are required within the business. This policy promotes the achievement of strategic objectives and encourages individual performance.
“Bank B” was established in 1965 by an Act of Parliament to meet the banking needs of the Ghanaian agricultural sector in a profitable manner. Before its
current name, the bank was known as the Agricultural Credit and Co-operative Bank.
The bank changed its name in 1970, when the parliamentary statute was amended to grant the institution full commercial banking powers. It is a government-owned development and commercial bank in Ghana. The government share in the bank is 51.83 percent while the Bank of Ghana owns 48.17 percent. The bank now has a staff capacity of 1,244 in branches distributed in all ten regions of Ghana (Agricultural Development Bank, 2013). In 2013, the bank’s profit before tax stood at GHC 83,928,000 as compared to GHC 26,696,000 in 2012; total assets were GHC 1,621,761 as compared to GHC 1,444,223 in 2012; shareholders’ funds were GHC 281,995 as compared to GHC 197,199 in 2012; customers deposits were GHC 1,061,102 as compared to GHC 965,018 in 2012; total loans and advances were GHC 914,350 as compared to GHC 773,694 in 2012, while the number of ATMs was 84 as compared to 76 in 2012.
The bank is the leading financial institution in agricultural financing in Ghana responsible for 35 percent of the total banking industry financing of agriculture. The bank maintains a network of eighty-nine (89) branches located in the ten regions of Ghana. There are also an additional four (4) farm loan offices and ten (10) agency offices. This adds up to a total of one hundred and three (103) service outlets. The range of services offered include: development banking, corporate banking, personal banking, international banking, diaspora banking services, treasury management services, and money transfer services in partnership with western union. As part of its three year strategy of embarking on a capital raising exercise to increase its capital to enable it to compete and become one of the top tier performing banks in Ghana, it is enhancing its human resource base to increase individual performance.
“Bank C” was established by the government of Ghana in 1963 as a national development bank. Later, the bank was granted a commercial banking license by the Bank of Ghana, the financial regulator. The shares of stock of the bank are as follows:
government of Ghana (52.60%), Bank of Ghana (43.7%) and others (3.69%). The bank has undergone management, institutional, and financial restructuring, which have strengthened the bank and now it has 31 branches and one agency nationwide and 21 ATMS.
Apart from its development banking activities, the bank also provides corporate and commercial banking facilities involving both domestic and foreign transactions at very competitive rates and on flexible terms. These includes: retail banking, trade finance, development finance product, treasury services, funds management, international banking, SME loans, N.I.B micro save, western union money transfer, boafo yena savings, daakye nkosuo savings, among others. To ensure that the bank’s customers receive consistent and efficient services, the bank has resorted to the use of highly-trained personnel to in order to provide standard banking needs promptly to their clients. By relying on proper HR practices, the bank is able to deliver quality services tailored to meet the requirements of customers.