Mopping Up Domestic Savings For Investment And Economic Growth – The Case Of Ghana
By Kwesi Atta Sakyi
Whoever thought of the rural banking scheme in Ghana did a good job. The concept has caught on well over the country and I think the scheme has more than served its purpose. For example, in Winneba and its environs we have the Akyempem /rural Bank which serves the local community fairly well. Their products are tailored to the needs of the community as their minimum deposit is low and they extend liberal lending facilities to the locals, unlike the long-winding bureaucracy of the traditional banks, most of which have their headquarters overseas. It is our cherished hope that this model of banking will be extended to all corners of the country in order to bring on board all the potential customers lying out there. In France, the Agricole Bank was set up by members of farming cooperatives and small scale farm holders. Today, it is the largest bank in France. Savings is said to be a function of income and the two are positively correlated. In order to increase savings, comes must be high and people should form the prudent habit of thrift by taming their propensity to consume. Yet there is the paradox that if savings become too high, the Keynesian multiplier effect will be dampened. This is known as the paradox of thrift. However, for any country to develop and come out of the poverty trap, there is the need for short term sacrifices for long term gain. I think our financial institutions should come out strongly with attractive packages of products which are bespoke and tailor-made for our rural communities and low income groups such as students, house wives, market women, farmers, self employed businessmen, among others. In this era of globalization, there is more of customer-focused and market orientated approach, whereby producers pander to the needs of customers by using the demand pull model rather than the supply-push model. The latter has been found to be ineffective, moribund and wasteful of resources. Some time in the past, government workers were subjected to compulsory savings and pension schemes. These schemes were meant to help workers at their retirement. However they were fraught with corruption, ineptitude and bureaucracy. It is therefore imperative to expect this hiatus in the market to be exploited by the financial houses in the private sector so that idle money or portfolio balances could be mopped up for national economic growth. Furthermore, massive campaigns should be mounted to sensitize and educate the public on the need for saving part of all their incomes for wealth creation and poverty alleviation.