It is impossible to imagine our daily modern lives without banks or the banking system. Banks are financial institutions that have come to simplify our lives and directly and indirectly have fuelled growth and development of many countries and societies. From the early days of banking in colonial times to the present day, in this article we’ll explore how banking has grown and changed over time in Ghana.
Banking History of Ghana – Colonial times
Cowries were also used as currency during precolonial and some part of the colonial history of Ghana
Trade in Gold Coast (As Ghana was previously called) was booming in the middle of the end of the 19th century. The industrial revolution had kicked in and was operating in full swing; many more raw materials were being transformed into processed goods at an unprecedented rate and capitalism, business creation and patent registration were booming.
The British, who were the colonial masters, brought to the Gold Coast their currencies and began to use them here as a medium of exchange. This started slowly and gradually replaced the cowries. However, up until 1912, various currencies were being used for trade in Gold Coast and the West African region which included British pounds, local currencies like cowries and currencies from other nations that had been in trade relations with Gold Coast.
The Industrial Revolution & the Bank of British West Africa
This is one of the notes being issued and controlled by the West African Currency Board.
The Industrial Revolution was born in the United Kingdom (UK) and for many decades, Britain was the global leader in the manufacture, production and exports of so many materials and services. As the years went by and the 19th century was drawing to a close, competitors had begun to arrive in the scene.
The United States of America and Germany became industrialized enough to compete with Britain on the manufacture and exports of materials as the 20th century got nearer, the competition intensified. This competition negatively affected the UK’s economy adversely such that many investors in the UK readily invested into assets in the United States and Germany.
Some English merchants, George William Neville and Alfred Lewis Jones attempted to create a banking operation along the West African coasts. The company they created- Elder Dempster was acquired by another British company and after a year was resold back to the previous owners which they changed to Bank of British West Africa in 1892.
Postcard showing the Bank of British West Africa on the same site of Accra’s High Street, c1900
They established a branch in Accra in 1896, essentially becoming the first bank in Gold Coast. Their main business was to distribute silver coins of which it was the sole supplier. They came to play a unique role in the economy and acted as the central Bank.
After the colonial government instituted the West African Currency Board, the Bank of British West Africa operated under the Board. By 1906, they had 3 other branches in other parts of the colony. Barclays Bank was set up in 1917 and these two Banks were the only banks operating in Gold Coast until 1953 when the Bank of Gold Coast was set up by the British colonial government and Alfred Engleston who was formerly of the Bank of England.
Banking in Ghana in the 20th century
Richard Haldane
Richard Haldane was an astute thinker, politician and lawyer. He was appointed as the Secretary of State for War of the United Kingdom in 1905 and his appointment came to an end in 1912. The United Kingdom had gone through the Boer war in South Africa prior to his appointment. He made several changes to Britain’s army.
As the years ensued, it became apparent to Haldane that the British empire was declining and, in his bid to be patriotic, suggested reforms which were instrumental in changing the fortunes of the country. In 1912, he set up a Departmental Committee to enquire into the currency in use in British West Africa. They came up with the recommendation to set up a West African Currency Board.
The Board was responsible for the production and distribution of currency in West Africa. Moreover, the committee realized that to promote economic development, a stable currency needs to be introduced and regulated. They also realized that to obtain full political and economic control of their colonies and advance their colonial interests, they had to set up the West Africa Currency Board. They were able to control inflation more directly and had a centralized system for managing currencies across different colonies.
Mid 20th century to present day
Bank of the Gold Coast
1957 brought a lot of changes in its wake because it became a very significant year. Ghana was granted independence from colonial rule by the British. This came with a lot of changes. The Bank of British West Africa changed its name to Bank of West Africa and subsequently was acquired by Standard Bank which later merged with Chartered bank and is known today as Standard Chartered Bank. The Bank of Gold Coast was divided into 2 entities: The Bank of Ghana and the Ghana Commercial Bank (now GCB Bank LTD.).
Legislation made the Bank of Ghana the Central Bank for the country and GCB Bank the sole holder of accounts of public corporations. Also, the government established other banks to meet the country’s financing needs. They were Ghana Investment Bank, Agricultural Development Bank and Social Security Bank.
Ghana went through a series of political and economic troubles in the 1970s and 1980s, and to help Ghana come back on track, The International Monetary Fund (IMF) necessitated the Bank of Ghana to shift from the rather ineffective direct control of monetary management and adopt a progressive liberalization of monetary management which brought about the introduction of market-based instruments.
In 1989, the Banking Law was passed, which opened the doors for locally incorporated companies to apply for licenses to operate as Banks. This was the catalyst that opened up opportunities for the establishment of privately-owned banks like Merchant Bank, Ecobank, CAL Bank amongst many others.
Over the years there have been some mergers and acquisitions and there have been some entrants and some exits. The financial services sector of Ghana has the Banking to be the largest segment and it is the most competitive.
Now there are banks, non-bank financial institutions, rural and community banks, microfinance institutions, forex bureaus and inward money transfer services. These have brought some good value to many and continue to. Ghana’s banking and financial services continue to evolve and get better.
