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General News of Monday, 30 November 1998

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Governor calls for cashless society

Accra (Greater Accra), 30 Nov. '98 The Governor of Ghana;s Central Bank has called on Commercial banks to adopt more electronic non-cash-based payment systems to promote efficiency in the banking industry and ensure effective implementation of monetary policy by the Bank of Ghana.

Speaking on the theme ''Banking in the next millennium, expectations, opportunities and challenges'' at the 28th anniversary of Ghana's Chartered Institute of Bankers in Accra, the Governor, Dr Kwabena Duffour noted that Ghana's payment system is highly cash-based and underdeveloped, saying: "there is still over-reliance on cash as a means of payment despite the few electronic modes of payment currently adopted by the banks.

He said the situation allows for increase in the cash flow outside the banking system, with its resultant increase in inflation, foreign exchange and interest rates and severe constraints on commercial activities.

The governor said the energy crisis and climatic shocks at the beginning of the year lowered the prospects of growth, leading to a downward revision of projected GDP growth from 5.6 per cent to 4.8 per cent.

He said the Central Bank, therefore, employed sales of treasury bills and the Repo transaction to control money supply by keeping reserve money at stable levels to reduce inflation from 20.8 per cent in December 1997 to 17.4 per cent in May, this year.

"The decline in inflation has enabled interest rates to decline gradually on the money market and given the cedi some stability against the foreign currencies."

Dr Duffuor said while the Central Bank is trying to reduce money in the economy to further reduce the inflation level to a single digit, "our current cash-based payment systems are impeding the Bank's effort."

He, therefore, called on the banks to co-operate with the Central Bank "so that we would fashion out an exchange market and build a better and safer banking system that can meet the challenges of the next millennium''.

He, therefore, welcomed the few electronic payment systems such as the MICR cheque systems, Automated Cheque Clearing, Automated Teller Machines and the plastic cards adopted by the banks and suggested that they go in for more of these systems to reduce cash flow.

"Good payment systems can contain the negative effects of high liquidity and reduce the risks and bottlenecks that impede monetary and financial stability. "

"It is my hope that by the end of the year 2000, we would have laid a solid foundation for payment systems that can support increasing trade and investment activities and also move Ghana forward into the middle income status," he stated.

Dr Duffuor also urged the banks to adopt modern information technologies such as telephone, TV, internet and intranet banking in their operations to meet the contemporary customer convenience.

He said many customers are convinced that hi-tech banking is a better alternative to using a branch of a bank, adding that only those banks which make use of hi-tech facilities would come on top of the industry in the next two to three years.

Dr Duffuor lauded the banks for introducing raffles and other attractive products and instruments which have helped in reducing cash flow outside the banking system considerably.

He, however, observed that the requirements of most of the new products do not make them suitable for small savers or micro-finance which reside mostly in the rural areas of the country.

"We must not pretend to be unaware of the fact that at least 65 per cent of our people live in the rural areas where our national wealth is hidden," he said.

He said most of the people in those areas are ignorant of the modern service and products and called on the bankers to penetrate those areas with instruments such as 'susu' cards and credit union cards as a way of introducing them to modern systems of banking.

Touching on the millennium bug, Dr Duffuor advised the banks to eschew competition on that issue and co-operate with one another in the sharing of information and solutions, saying: "the failure of one bank to prepare well against the bug could affect other banks''.

Mr A. A. Tannor, outgoing President of CIB, said the institute has prepared a new syllabus to train students to meet contemporary standards in the financial and banking industry, adding that new training materials have also been prepared at affordable prices to help prospective students to meet the requirements of the syllabus.

Mr Jean Nelson Aka, new President of the CIB, pledged to build on the foundation laid by his predecessors.

Eleven students were awarded certificates and cash prizes for excelling in various areas of banking, with the BOG overall best student award going to Mr Anthony Effah of Merchant Bank Ghana Limited.

Eight new associate members of the institute were also ushered into office.