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INNOVATION IN THE GHANAIAN FINANCIAL MARKET

Financial innovation is define as the act of creating and popularizing new financial
securities, institutions, technologies and markets. In the Ghanaian financial market, intense
innovation has being the order of the day. Nevertheless, the insatiable quest for competitive advantage
has made innovation more intense. The impact has been evident when Ghana Stock Exchange
emerged the Most Innovative African Stock Exchange for 2018 at the Africa investor Research (AI)
Capital Market Index Series Award. The primitive task performed by financial markets in Ghana
remained comparatively unchanged over the decades, the structure of the market has witnessed
dramatic change. Transactions in Ghanaian financial markets are generally on wholesale basis.

Before innovation in financial markets, customers and investors have to travel for long
stressful hours before having their business dealings. Investors and customers have to carry money to
financial markets. Even if the amount involved makes it dangerous to carry about, people have to bear
the stress and danger. Over the past decade , there were limited choices for customers to choose from.
Customers can have business with limited number of financial institutions available to decide to work
with. There were also obvious low competitions between financial institutions. This is since the number
of financial institutions in decades was scanty.

There are three main types of financial innovation which are institutional, product and process
innovations. Institutional innovations relate to the making of new types of firms such as specialized
credit card like discount brokerage forms and internet banks. Product innovation relate to new products
such as derivatives, securitized assets and foreign currency mortgages. Process innovations relate to
new ways of doing things. Example: Online banking and telephone banking.

Traditional delivery methods have given way to new delivery technologies which include e-
banking products such as Internet banking, mobile banking and various Automated Teller Machine
(ATM) products. Information and communication technologies (ICTs) are changing the way financial
products are assessed by customers in sub-Saharan Africa. Traditionally, financial markets have sought
technologies which enabled them to serve their clients more cost-effectively and made them more
useful to their clientele. Arguably the most revolutionary electronic innovation in Ghana has been the
ATM . In Ghana, banks that offer ATM services have networked their machines, to increase their utility
to customers. Since Trust Bank Ghana ATMs in 1995, the technology has found acceptance on a
massive scale from the banking industry. Today, almost all financial markets in the country offer ATM
services to their clients. Productivity in the Ghanaian market has significantly increase with machines
and human serving the customers . Customers benefit immensely as a result of shorter queues in
financial markets. ATM services offer an alternative to queuing in financial markets , customers are able
to invest such time saved in other productive activities. As indicated by Rose (1999), ATMs have become
a cost-efficient means of yielding higher productivity.
Internet and mobile banking have received indelible acceptance from the industry. Most firms
co-ordinate with telecommunication companies to provide services via the Internet and mobile phones,
which they hope will help them gain sustainable competitive advantage. The idea of Internet banking,
according to Essinger (1999), is ‘to give customers access to their bank accounts via a web site and to
enable them to undertake certain transactions on their account, given compliance with stringent
security checks’. In Ghana, firms have introduced Internet banking in their operations. By its nature,
Internet banking offers customers greater convenience and flexibility, coupled with virtually absolute
control over their dealings. Mobile banking (Internet banking using mobile devices, also known as M-
banking, embanking, SMS banking etc.) has also become an essential channel for delivering financial
products to customers. With the development of mobile applications, customers are able to inquire
account balance and transaction history inquiries, transfer funds and pay bills via mobile devices such as
cell phones, smartphones and PDAs (personal digital assistants). The widespread introduction of these
products onto the banking market means customers are benefiting from such innovations. The factors
influencing the adoption (usage) of such innovative products have not been examined empirically in the
context of the Ghanaian industry, and this gap is what largely informed a lot of studies.

Parliament of Ghana passed security industry bill. This has led to Ghana inclining towards
becoming security oriented market. Basically it is to help us share the information and be cooperative
with other regulatory bodies across the world. The new law has many new provisions that can aid
improve the industry. These include derivatives like the commodity exchanges, operation of nominee
accounts to be operated as well as other issues like lending and borrowing. Demutualization acting as a
driving factor is changing the stock environment of Ghana inviting investors as partners. Ghana
Securities and Capital Market conference will bring together important stakeholders from the industry
including Policymakers, Investors, Research analyst who will deliver future prospects of Ghana’s Capital
Market. It will present the repercussion of recently changed Security Industry Bill and the future aspects
of it by scaling its potential. The conference will highlight the arising opportunities in Capital Market of
Ghana after the significant merger of International Finance Corporation and Ghana Stock Exchange.
Through this conference the keynote speakers would be able to identify the challenges that should be
resolved, such as lack of laws and regulations pertaining to the commodity exchange; inadequate
financial support; lack of trading infrastructure; inadequate volume; liquidity problem; smallholder
farms; lack of understanding of trading instruments; and government/political interference on this end.
The current blueprint suggest a need to improve inadequate infrastructure and capacity building of
market participant. Managers of the Ghana Stock Exchange (GSE) have hinted at plans to create a
derivatives market on the local bourse in a bid to increase liquidity and increase activities on the
exchange.

It will provide investors interested in shares and currencies a chance to enter into binding
contracts for buying or selling the units at a specified price and time in future, helping them better
manage risks, hedge, arbitrage and speculate over their future value. However, complexity in derivatives
could delay the GSE plans as most traders on the stock market are not familiar with their trading
mechanisms. This is evident in Kenya, for instance, where plans by the Nairobi Stock Exchange (NSE) to
create a derivatives market have been postponed several times, which the NSE attributed to the need
for market players to deepen their knowledge about financial derivatives and also to create public
awareness. Some investment bankers have warned that derivatives, though a good tool to deepen the
market, could be a dangerous investment instrument as common investors could develop speculative
interest with them.

Prospective investors are able to collect information on various products to invest in on the
internet as well as diversify, in other to reduce risk. Online platforms such as I Broker Ghana among
others have been able to give a fair idea on how the price of securities are faring . Investors have
multiple streams of information for decision making which reduce risk. Financial innovation has reduce
cost. E-banking (financial innovation) has reduce cost of transportation to pay for goods or services.

With regards to the Government of Ghana securities, the total outstanding securities at as
October 2018 had grown to Ghs60.6bn (2017: Ghs49.2m) representing a 23.2% growth year-on-year.
The growth was largely seen on the 10year tenor securities which inched up from Ghs4.7bn to Ghs7.9bn
in 2018. With a shelf value of Ghs11.8bn, the forty-one (51) corporate bond listed had raised Ghs6.6bn
representing 56% achievement. All these securities are traded on Central Securities Depository (CSD)
and Bloomberg e-bond trading platform.

In the light of the above, the future of the Ghanaian Secondary financial Market looks very
exciting. Corporate issuers have to take advantage of the cheaper sources of funding. Now, Ghana is in
the time period of relatively better continuous economy growth, objectively requiring the deepening
development of the financial market. In this process, the establishment and development of derivative
market is thoroughly necessary. Most banks have established an app – but it predominantly offers the
same digital services for every customer. This will be replaced by highly specified and targeted digital
platforms for individual needs. Loans, insurance products and credit aren’t widely differentiated in the
market. Be prepared for state-of-the-art, Omni channel platforms and products, as safe and secure as
they are convenient. A mortgage-only bank, for example, might be possibility in the future. The
traditional challenge has always been the lack of a credit or debit card, which can be overcome by the
introduction of a virtual card service. An interim set of card details, designed and released for one
transaction only. A worthwhile payment mechanism with endless benefits for retailers and customers.