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Opinions of Sunday, 19 December 2004

Columnist: Adomako-Gyimah, Julian

Ethical Banking and The Sikaman

Ethical problems are managerial dilemmas as they represent a conflict between an organisation's economic performance as measured by its revenues/costs/benefits, and its social performance as measured by its obligations to people inside and outside the organisation. The nature of these obligations is often open to interpretation, but most would agree that they include protecting workers, producing safe products, maintaining competitive markets and observing the legal framework of their operation. Is there a right or proper or just balance between economic performance and social obligation? The answer must be yes, but managers must strive to find that balance.

A na?ve interpretation of 19th Century moral philosophy would argue that the balance between economic and social performance is a non issue, as the economic performance is all that counts and that the obligations of the manager is only towards the shareholder and no one else. This is a view explored by Friedman in the middle of the last century. Indeed there is evidence, from America, that the primacy of the shareholder is increasingly prevalent. Indeed, this primacy of the shareholder's interest over others in the system is enshrined in company law and is informed by the agency view of the firm and common in Anglo-Saxon economies. It is interesting to note that in other economic systems, such as Japan, Korea, Germany and France, variations of this model apply and obligations to 'others' (outside stakeholders) can have primacy. A less na?ve view would be to recognise that managerial decisions do impact on others and that decisions can have far-reaching and often unintended consequences.

In most financial institutions in Ghana today, this idea of ethical business isn't even considered as an important part of business strategy. Most of the banks don't even see the need to come up with innovation products that are ethical and all they do is follow the normal banking practice to the detriment of the entire nation. Internal efficiencies and interorganisational efficiencies can be translated into bargaining power which can in turn to transformed into competitive strategies (Bakos and Treacy Framework).Banks like Barclays and Stanchart have established themselves as Banks for the affluent because the minimum account balance is set at around 500,000 cedis. Once an account balance falls below this mark, these banks unethically make deductions to the detriment of their image. Is it not better to have more customers and give out more money for as long as the customers have low risk payment histories? It is just unfortunate that, these banks who have their roots in the western world have failed to increase their market share over the years.

Inflation, high interest rates and high exchange rates are macro-economic elements that would have made these financial institutions make money if only they had the right people in the heart of management. Interest rates on borrowing are quite high on the whole hence the need for one bank to be innovative and come up with reasonable interest rates to enable them take the financial market by storm. SkandiaBanken saw such a loophole in the swedish banking system and decided to come out with a differentiation and cost leadership strategy. They reduced interest rates on borrowings and increased interest rates on savings and one can just guess what happened next. Within a year, they had become the most successful bank in the swedish financial market and they are today regarded as one of the most innovative institutions that Sweden has ever seen.

Management tools such as mind mapping and brainstorming are there to be used by managers in the financial sectors to come up with strategies that gives them competitive advantage. Customer relations Management is another area banks can explore to increase their market share as this makes it possible for them to monitor consumer buying behaviour. They will also get to know what consumers want and provide it for them. The Ghanaian is just trying to make ends meet and it is about time financial institutions capitalise on this to make more profits whilst they reduce costs. It might be true that Barclays and Stanchart have X thousands of customers but won't 2X thousand be better and help generate higher accounting rates of return and high net present values?

The businessman in the Western world makes twice what his counterparts in the developng world makes not because he is a genius but it is because he studies that market very well and provides ethical products that often act as substitutes for consumers. I agree with the fact that, what is ethical to me might not be ethical to another person but if we look at the Co-operative Bank in the UK, we would see the power of ethical banking. This bank does not make any decision without consulting the customers because whatever decision they make, would to a great extent affect the customers. They operate by strick ethical and moral values but they are still one of the most successful banks we've ever seen.

I think it is about time the financial institutions in Sikakrom look for new markets and provide ethical banking services because ethics is gradually a big issue which might one day haunt them. Everyone is welcome for any further discussion on this area and may our dear motherland live to become a cornerstone in global banking.


Julian Adomako-Gyimah M.Inst.BA

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.