GAB moots multi-stakeholder financial literacy fund

The Chief Executive Officer (CEO)-Ghana Association of Banks (GAB), John Awuah, has proposed the creation of a multi-stakeholder fund to deepen financial literacy among customers.

He emphasised the importance of all players in the financial sector working together, as customers are often multi-banked and multi-platformed – which can lead to confusion if different entities provide varying levels of education.

“Given that we are all focused on the same customers and that customer is multi-banked, multi-platformed, and it is not telcos doing theirs, fintechs doing theirs and banks doing that; how do we work together? It could be all players coming together and having a fund of sorts to deepen customer education, because it is one tricky area and if you are not careful you will confuse the customer,” he said during a question and answer session during the recently-concluded third edition of The Money Summit (TMS).

“If one entity does some level of customer education – talking about A, B and C, and each of the 23 banks also goes and says theirs it could get confusing,” he noted, saying there is need for a thematic education approach that focuses on core needs of the customer, the products available and how to safely use them.

Mr. Awuah stressed the importance of safety, as customers who lose money on one platform may avoid the entire financial ecosystem, saying: “I’d like to emphasise the safety of use, because the problems we are having within the ecosystem – if we do not tackle them now – will be the issues that stop us from going forward. Because if I lose money on one platform, not only will I not return to that platform, I will avoid the ecosystem as much as possible. And that is one customer too many lost”.

His comments at the event, which was held under the theme ‘Africa’s robust financial sector: the catalyst for sustainable economic growth’, come amid heightened customer apprehension over conduct and communication within the financial sector.

The 2018 financial sector clean-up, for instance, highlighted lack of understanding for the difference between regulation provided by principal regulators, the Bank of Ghana (BoG) and the Securities and Exchange Commission (SEC), and their interaction with other entities such as the Registrar-General’s Department.

The former – which regulates deposit-taking institutions that do not have the primary duty of investing such funds for direct returns – has the power to appoint a receiver and take over the running of a company that has had its licence revoked, while the SEC does not have this power. Instead, the SEC relies on a liquidation pathway, which involves notifying an official liquidator (the Registrar-General) which must apply to a court for the liquidation orders. This process can take longer than the receiver pathway used by BoG.

Also, the handling of the infamous fixed-return entity Menzgold continues to draw ire from the public. The regulator’s warnings appeared luke-warm, and its chief – Nana Appiah Mensah, known colloquially as NAM1 – seemed to launder his image through interactions with well-known persons. These sentiments have been compounded by his seemingly running rings around the judicial system.

The tension was not aided by frantic implementation of the Fair Value Through Other Comprehensive Income, or mark-to-market valuation approach of portfolios as well as the Domestic Debt Exchange Programme (DDEP). Already, dynamics of the investment space – equities, primary and secondary issuances – appear to be an esoteric subject to many.

One of the major issues that affects all stakeholders, GAB’s Chief Executive added, is social engineering fraud. Awuah stressed the need for a national agenda to address this problem as it affects even the savviest members of society, even as the association is set to embark on a campaign on the subject.

Last year, the banking sector experienced a surge in losses due to fraud and other malpractices, resulting in a total of GH¢61million lost. This represents a significant increase of 144 percent from the GH¢25million lost in 2020, with 54 percent involving staff of the financial institutions.

During the same period, the Electronic Money Issuers (EMIs) platform in the country reported a total of GH¢12.8million lost due to mobile money-related fraud. The EMI sector recorded a high number of MoMo fraud incidents totalling 12,350 – resulting in a total reported fraud value of GH¢14.2million for the year. Experts have cited social engineering as a key cause.

Democratisation

Another significant concern for the financial ecosystem is regulation of digital money, especially in light of recent events in the cryptocurrency market. Mr. Awuah pointed out that the top-10 crypto entities that filed for bankruptcy – led by FTX and Genesys – last year lost billions of US dollars in investor funds. He noted that these entities were barely known, and there was no proper regulation or recourse for customers.

As fiat money continues to evolve, Awuah believes that there will be fewer dealings with physical cash and more digital money. However, this digital money must have backing from regulators to build trust.

“One core element of money is the strength of what backs it; and if what has happened in recent times in the crypto environment is anything to go by, then we should be asking, How do we regulate even more?” he noted.

He expressed scepticism about the value of crypto as a store of value, noting that it moves like a curtain in a room – lacking transparency. At the end of 2022, the industry leader – Bitcoin – had plunged by 65 percent from its all-time high of US$68,789.63.