MONEY AND BANKING

Trade by barter (direct exchange of goods and

services for goods and services.
Problems:
• Double coincidence of wants
• Unit of exchange
• Indivisibility of commodities
• Burden carrying goods for exchange
• Problem of lending
• Problem of saving

PRINCIPLES OF ECONOMICS UMaT, TARKWA, GHANA 1

 MONEY

Money is anything that is generally accepted as a

medium of exchange anything that will be
accepted by virtually everyone in exchange for
goods and services.

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 Characteristics of Money
1. It should be readily and generally accepted
2. It must be portable to transport
3. It must be durable
4. It must be scarce
5. It must be divisible into smaller units to allow for
smaller transaction
6. It must be homogeneous
7. It must not be readily counterfeited else it would
loose its value
8. It must be recognisable

PRINCIPLES OF ECONOMICS UMaT, TARKWA, GHANA 3

 Modern forms of Money
• Coins
• Paper money or Bank notes
• Bank Deposits

PRINCIPLES OF ECONOMICS UMaT, TARKWA, GHANA 4

 MONEY
Functions of Money
1. Medium of Exchange
2. Unit of Account
3. Store of Value
4. Means of deferred payment

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 IMPORTANCE OF MONEY
1. Money gives maximum satisfaction
to people for work done
2. It enables people to defer
payments for goods and services
that cannot be paid for today.
3. It encourages division of labour
and specialisation

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 Importance of Money
4. It make it possible to assess,
determine and place value goods
and services
5. It has improved the standard of
living
6. It has made it easier for individuals
and organisations to raise

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 BANKING
A bank may be defined simply as the
process of accepting deposits and giving
out loans including monetary advisory
services to customers.

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 TYPES OF BANKS
1. The Central Bank
2. Commercial Bank
3. Development Bank
4. Rural Bank
5. Other Financial Institutions

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 COMMERCIAL BANKS
Types in Ghana (examples)
1. Ghana Commercial Bank
2. Barclays Bank Ghana
3. Standard Chartered Bank

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 DEVELOPMENT BANKS
Examples
1. National Investment Bank
2. Agricultural Development Bank

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 RURAL BANKS
Examples in Ghana
• Antwiwa Rural Bank
• Mansoman Rural Bank
• Upper Manya krobo Rural Bank
• Lower Pra Rural Bank

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 OTHER FINANCIAL INSTITUTIONS
Examples in Ghana
• The insurance companies
• The Credit societies
• Money lenders
• Building societies
• Discount houses
• Stock exchange
• Forex bureau
PRINCIPLES OF ECONOMICS UMaT, TARKWA, GHANA 13
 THE CENTRAL BANK
Functions of the Central Bank
1. A bank to the government
2. Banker to the commercial banks
3. Issues notes and coins
4. Controls and regulates the money supply
5. Lender of last resort
6. Responsible for setting up development banks and
rural banks
7. Supervises and regulates activities of financial
institutions
8. Licences all financial institutions in the country

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 CENTRAL BANK
How it controls the Credit
• Open Market Operations (OMO)
• Bank Rate
• Reserve Requirements/Cash Ratio
• Selective Credit Control/Directives
• Special Deposits
• Direct Order
• Moral Suasion
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 COMMERCIAL BANKS (JOINT
STOCK BANKS)
Functions
1. They accept deposits.
2. They act as agents for their customers making
payments on their behalf.
3. Valuable properties such as gold ornaments and
jewellery and kente are kept with them for safe
keeping.
4. They give advice to prospective investors as to
which sector of the economy to invest in.
5. They undertake investment by granting loans,
overdrafts, discounting bills or buying shares in
business enterprise.
6. Transact business on behalf of their customers.

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 NATIONAL INVESTMENT BANK
Functions
1. To provide and advice on sound business
management skills to local entrepreneurs and
potential entrepreneurs.
2. To provide business capital to existing and
potential investors.
3. To identify investment opportunities to potential
investors and to undertake joint business
ventures.
4. Generally, it was established to promote and
strengthen the productive capacity of all the
sectors of the country.

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AGRICULTURAL DEVELOPMENT
BANK
Functions
1. Provide credit facilities to the agricultural
sector of the economy.
2. Conduct research into agriculture in general
3. To invest in processing and the distribution
of agriculture produce
4. To mobilise human and financial resources
to develop the agricultural sector.
5. It provides normal banking functions to the
citizens.
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 TYPES OF ACCOUNTS
• Current Account
• Savings Account (savings deposit)
• Fixed Deposit (time deposit
account)

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 Current Account
Features of Current Account
I. The customer uses cheques to withdraw money from
his account.
2. He deposits money with pay-in-slip
3. Money can be withdrawn at will without notice
4. The bank charges commission (bank charges) for
the services rendered to the customers
5. Statements of accounts are sent periodically to the
customer to show his statement of affairs with the
bank.
6. Holders of current account do not receive interest on
their accounts
7. Customers enjoy overdraft facilities
8. Customer does not need to be at the bank personally
before money can be withdrawn.
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PRINCIPLES OF ECONOMICS UMaT, TARKWA, GHANA
 Fixed Deposit
Features of Fixed Deposit
I. The customer's deposit serves as a security for a
loan from the bank
2. The customer must be present at the bank for
withdrawals
3. The customer uses credit form to deposit money
4. The customer uses debit forms to withdraw money
5. The bank does not charge any commission on the
services rendered to the fixed deposit account
holder.
6. The fixed deposit account holder interest on his
deposit.
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