Author name: Dr Maxwell Ampong

In his review of the economy in parliament in 2003, Mr. Yaw Osafo Maafo described the gap between BoG and the lending rate of the commercial banks to be unacceptably high. He called on the banks to respond positively to the decline in the inflation rate. In 2021, the senior advisor to the President of Ghana and my fellow Akora from Achimota again, in his address to the gathering at the 2021 Ghana Industrial Summit and Exhibition in Accra, called on Commercial banks to reduce their lending rate. His call at the Summit was mainly based on the fact that factors such as exchange rate, inflation and prime rate that affect the cost of lending rates have been on a decline due to the banking sector reforms. Therefore, the reforms have addressed the inherent risk elements of commercial banks’ lending, and as such, the interest rate and the Bank of Ghana (BoG) policy rate gap should be narrowed. He is absolutely right. The Monetary Policy Committee of the Bank of Ghana (BoG) sets the prime rate, which various commercial banks and other financial institutions also operate with in Ghana. This influences the commercial banks’ lending rates. It serves as a benchmark used to signal the cost of funds, which is expected to be transmitted throughout the financial system, as banks reflect it in transactions among themselves and with the general public. The degree of transmission of the policy rate depends on the degree of development and competition in the financial system. However, in Ghana, the transmission of the policy rate through the lending rates of the individual banks has been extremely tardy (Kwakye, 2010). In as much as the decline in the BoG’s policy rate is a major determinant of the lending rates of the commercial banks in Ghana, other facts equally exert significant influence on the lending rates of commercial banks. Notable among them is the commercial banks’ Minimum Reserve. The commercial banks’ Minimum Reserve is the percentage of deposits commercial banks must be retained as a backup. The BoG also determines this, such that whenever BoG makes an upwards adjustment of the commercial banks’ reserve, the amount of money available to the banks to lend to their customer is reduced. Prof. Joshua Yindenaba Abor is a qualified accountant, financial economist and Professor of Finance with a lot of years’ expertise mainly in economics research and development finance. Abor (2004) asserts that the commercial banks’ Minimum Reserve requirement eventually leads to an increase in interest rate. It safe to suggest that the impact of the increase in the minimum capital requirement for commercial Banks from GH¢ 120 million to GH¢ 400 million by the BoG is one of the reasons why the lending rate is still high. The central premise of the call of Mr. Yaw Osafo-Maafo is the impact of the banking sector clean-up exercise. He believes that the reform has reduced the risk elements of commercial banks’ lending. One of the indicators of this risk element is the non-performing loan ratio (NPL), which measures the effectiveness of a bank in receiving repayments on its loans. The 2020 BoG Banking Sector Report indicates that the NPL ratio was 18.4% at the end of 2018, this declined to 14.3% in 2019 due to the reforms. However, the NPL ratio at the end of 2020 began to rise again due to real non-recovery of credit. Since this is a ratio, it is possible that the total amount of outstanding loans the bank holds is increasing whilst the amount of non-performing loans in a bank’s loan portfolio remains unchanged, causing the ratio to increase. Also, the fact that the non-performing loan ratio has declined does not necessarily mean that the value of the non-performing loans has declined. Would you say that the period after the clean-up exercise represents a feasible time space to perform a cost-benefit analysis for lending rate declines? It is important to interrogate whether the banking sector clean-up has really reduced the risk element of commercial banks’ lending. The reforms came with some cost – some GH¢ 21billion was spent by the government on the clean-up. This is the reason for the introduction of a new 5 percent financial sector clean-up levy in the 2021 budget. The levy is expected to help provide the money to pay for outstanding commitments in the sector and is projected to run until 2024 and be reviewed after that. This could be one of the reasons why commercial banks are dragging their feet in reducing their lending rates. Since the banks are in the business of making a profit, they will shift the cost on the borrowers, causing their lending rates and other charges to be high. Additionally, the clean-up also reduced the number of banks from thirty-four (34) to twenty-three (23). At the same time, three hundred and forty-seven (347) micro-finance institutions, fifteen (15) savings and loans, and eight (8) finance houses had their licenses revoked. Kwakye (2010) asserted that the degree of transmission of the policy rate depends to a large extent on the degree of competition in the financial system. Therefore, the decline in the number of banks and financial institutions will impact the competition in the banking sector. One possible implication of this decline in the number of in the number of banks and other financial institutions in Ghana now is that it prevents commercial banks from decreasing their lending rates. The immediate impact of the reduction in the number of banking institutions imposes a constraint on credit accessibility, interest rate, and credit rationing (Maiti et al., 2020). According to Boamah (2019), the expectation is that competition of the commercial banks for customers will result in a substantial fall in their lending rates. However, the contrary is true in the case of Ghana as Mr. Yaw Osafo Maafo has stated recently. The truth is, while increased competition in the banking sector in Ghana did not lead to a low lending rate, a reduction in competition through the

I have two friends that always leave me feeling somewhat better after I speak with them. One is always on some cool project that stimulates my intellect so our conversations are great. I call the other one to complain about issues I have every now and then and hear his as well.  When this second guy tells me about his concerns, his debts, his personal struggles, no matter how worried I feel about my situation, I always finish the conversation feeling like “Wow Maxwell you have it not as bad as you think, AT ALL!”. That is how refugees make me feel when I speak with them. They make me feel like Ghana’s cherished democracy and affinity for peace and calm should not be undervalued in the slightest bit. My network provider frustrates me so much when I get interrupted cell service (I am not naming anyone oo). Traffic on the relatively short route to my house after work can keep me in a foul mood for taking two hours I could have deployed doing something else. After I speak with Rya Kuewor and Avina Ajith, that day, I whistle on my way home. Why? Because I feel lucky to have my life as it currently stands. Also, read the title to this article again: Crypto-driven Universal Basic Income as a tool to reach refugees during the pandemic. What a title! These are the guys behind such an initiative.  Look at all the havoc COVID-19 is wreaking with its line-up of variant after variant. I just read about a new Delta-plus variant and I haven’t even fully understood the Delta variant yet. If you find yourself in a refugee camp, you can just imagine how quickly things can get dire. As noted by the Global Spokesperson for the UNHCR, “Discriminatory restrictions on access to health and social services and a dramatic loss of livelihoods is driving many refugees and others on the margins of society deeper into poverty and destitution.” Also reported in Ghana, “Refugees and migrants were left more vulnerable with limited protection and rights, facing inequitable distribution of even masks and soap, ostensibly existing refugee aid and support weren’t sufficient in dealing with a global pandemic.” Refugees have had it badly long before this deadly global pandemic reared its ugly head, which raises the question: how can we relieve the extreme duress on certain communities around the world struggling to cope with the impacts of COVID-19? The public has the tendency to always point to what should have been done. Spend a cedi here and you’d hear how you should have spent it there. Spend a cedi there the next time and you’d here how something way over there needs more attention. Let’s not do this with this subject matter. Let’s concentrate. Refugees leave their countries for various reasons, mostly seeking refuge, as the name suggests. You’d cherish your access to education when you hear how without the limited scholarship and donor programs available to them, a significant number of refugees have to stop schooling after junior high, that’s even if they get there. One man came to Ghana from Liberia in a canoe, after losing his entire family to gruesome war crimes.  Let that sink in: he came not in a boat, not in a ship, but a canoe, from the shores of faraway Liberia, to Ghana’s shores, by sea, amidst all the storms and tidal turbulence, in a handmade wooden canoe. Anything could have happened. And he came here with nothing, lucky to have his life and a chance at another shot at living.  If a group of young migrant integration consultants have figured out a way to impact these refugees, and in a big way, then it’s worth mentioning. Even with just $1.50 a day to a refugee as Universal Basic Income (UBI), utilising cryptocurrency and other innovative ways of disbursement, it can mean everything and anything from food for an entire household to much needed basic medicine. Rya and Avina impact tens of thousands of refugees through the Refugee Integration Organisation (RIO). Please find information on work that’s being done below, by kind courtesy of RIO. RIO and partners find a way past the exclusionary modernity of technology to bring blockchain-driven UBI to underprivileged refugee communities. With the accelerated advent of the Fourth Industrial Revolution, it has become ever more easy to deploy new cutting-edge technologies in existing and worsening vulnerable communities. But innovations in new tech do not necessarily translate into working solutions. Sometimes, tech needs to be dialled back in order to reach the most vulnerable in communities and have the most effective outcomes.  The Refugee Integration Organisation (RIO) did just that by taking a cryptocurrency (Celo Dollar) based UBI programme by Impact Market — which distributes money through mobile apps — and incorporating a USSD feature linked to beneficiary mobile money wallets, so even refugees without smartphones or those who aren’t tech savvy could receive these vital funds. In short, unaccompanied minors, the elderly, the ill etc., can all access these funds without any special training. In thinking through solutions, we ask ourselves — are practical economic development interventions in refugee camps truly as difficult to achieve as they appear? The answer, for us, is “No”. RIO displays great scope by scaling down technologies, creating the right partnerships, and skilfully shifting power-of-management to the residents of refugee camps. Resistance to UBI is founded upon people’s visceral response to unconditional hand-outs, forgetting that the hand-out is only enough (if even) to support subsistence and bare survival. Critics often fear outcomes of induced lethargy, loss of productivity and moral hazards. They believe UBI could have a negative domino effect on economies by reducing people’s incentive to work (or inducing a disincentive effect on the workforce) and driving up wage rates.  However, a World Bank report and empirical research across contexts has shown no negative effects on labour force participation and enhancements in productivity. In fact, a study on a Namibian UBI experiment called BIG shows that the programme encourages people to pursue more income-generating activities, thus producing positive spill-over effects for

You have a good idea… then what? In Ghana, ideas unfortunately do not have a well-defined route to turning into large-enough enterprises such that your community, your country, your continent benefit from it.  By the way, you inspired this article.  All of you that text, email, dm and call me after every publication to discuss ideas about varying subject matters, you inspired this article. Because regardless of the subject matter, a common closing theme with all the awesome brainstorming conversations has been “…but Max where at all do we find the money to do this?” Not to get you too excited… but I think I might have found the answer of where to get the funding for anything as small as just an idea, or as big as an already functioning well-to-do business. To fully grasp the opportunity, we need to first understand how things are going to be. If you have as little an idea, and that idea sounds pretty good to an investor, you need to put a price on it. It will totally be up to you to decide the value of your pending company, and how many shares you want to sell to an investor for funding. If an idea works and you start a company, you’ll obviously need money. Many have learnt that the odds really are against you when you start a company with your limited savings, so better get an investor early. There’s just too much risk inherent in the activities of startups and one-man entrepreneurs. If your idea doesn’t take off, you lose your precious time and the wealthy investor learns something towards his next venture. But if your idea starts off well, you’ll soon realise that you need money to stay in business or to scale up; so why not share that early risk with someone that has the liberty of losing their money and has more experience than you do. Traditional financial institutions are beginning to cater better to the needs of the small and the beginning. Still, in Ghana, ideas unfortunately do not have a well-defined route to turning into large-enough enterprises such that your community, your country, your continent benefit from it. When your idea is good enough, typically, you’ll need what we call seed funding. At the beginning, your idea is like a seed, full of potential but useless until it goes into the soil and catered for. You’ll need to first plant that seed knowing very well it might not germinate. Therein lies all the risk that traditional financial institutions do not want to underwrite.  That is why early investors at this stage are called seed investors. Many seed investors are high net worth individuals that have enough money to bet that you are more likely to succeed than you are to fail. How do they know? Every seed investor invests for different reasons. What they all have in common is that they are aware that you are not yet a big fish, but they are willing to grow with you. If the seed is the idea that’s good enough, then what happens when you have an idea that’s not executable yet? That’s the pre-seed. It means you have something, but it’s not good enough to attract serious funding yet. Are there pre-seed investors available? Yes! These are they guys that think “here, take this little token; execute and let’s see if the simplest version of our product/service works”. Pre-seed investors try to help you create what we call the minimum viable product (MVP). Your MVP is a version of your product with just enough features to be usable by early customers who can then provide feedback for future product development. I took this straight from Wikipedia because it explains it well.  See how it mentions “future product development”? It means pre-seed investors understand that their money goes to do the work required (pre-seed) before the work that is required (seed) before the real work actually starts (seed sprout). Further funding are categorized Series A, Series B, Series C, etc. The earlier the stage, the more the risk, the lower the valuation of the enterprise, the cheaper you can buy in, and the bigger the gains for anyone that invested early IF the whole thing works out. Remember that the investee company can as easily just go bust. That’s why seed investors are usually high-net-worth-individuals with lots of money to spare. I’ll give you an example for perspective, then we proceed. Back in 2013, Rapper Nasir Jones, popularly known by his hip-hop moniker Nas, invested between $100,000 and $500,000 into a company called CoinBase in a Series B funding round. That round valued CoinBase at about $150million. Even if he invested the maximum estimated $500k, he then owned only about 0.33% of the company. CoinBase is a platform to buy, sell and store cryptocurrency. I remember 2013 very well. Cryptocurrencies were still spoken of then as a social experiment that was too risky to buy into and could potentially wipe out all of your investments. Fast forward to 14th April 2021. CoinBase goes public with an successful IPO (Initial Public Offering) on NASDAQ. The company is now worth dozend of billions of dollars. Nas’ earlier investment has turned into an estimated $100,000,000 if he invested $500k. That’s a hundred million dollars on $500k within 8years. He could just as easily lost all of his money. Moving on. When you ask investors to give you money for a share of your company, the investors decide on how much they can buy and you as the founder decide on what percentage of your company you can give them in exchange. It’s a negotiation. If for instance the investor gives you ₵100,000 and you decide to give him 10% of your company, that means that you’ve valued your company at ₵1,000,000. You have to divide the invested amount by the percentage given to get your company valuation. 100,000 ÷ 10% = 1,000,000 It is always very important and most advisable to consult a good lawyer and an appropriate finance professional when engaging