“We need to make banking more accessible to the entire population”

How is the finance sector taking advantage of Africa’s increasing attractiveness for international investors?

Historically, we have seen a cycle of trends in Ghana. We enjoy relative political stability, as compared to other countries in the sub-region. This has made Ghana the preferred destination for investors. However, in the lead up to any election, investors tend to remember that Ghana is just like any African country; so there is a bit of nervousness and anxiety. You see that there are two main political parties that are vying for power. The race is usually close so that you are never able to tell who is going to win outright. Investors tend to withdraw their investments just before the elections, and after elections, they wait for signs of stability before they reinvest.

The impact is also felt in the banking sector, because when investors bring in money and they need to redeem their investments, one should be able to find the resources to meet these financial commitments and this invariably puts the exchange rate under stress.

If you are not generating enough revenue from exports while your taste for imports is very high, then there is always going to be a deficit and thus pressure on your local currency.

Your neighboring Nigeria raised itself as the biggest economy in the continent in April. What many people don’t know was the growing role of agriculture in boosting Nigeria’s economy – and the lives of its large rural population. Akinwumi Adesina, Nigeria’s agriculture minister, said last year, “In Nigeria, we’re making agriculture the new oil.” What can Ghana learn from the progress of Nigeria’s agricultural sector?

Nigeria has had the experience of mining oil for 40-odd years. It has learned from the difficulties of just relying on oil. It has not helped much, the discovery of oil in Nigeria has become something like a curse on the country. A lot more people have become impoverished, and it also bred corruption.

Ghana recently discovered oil. Even if we are producing more oil than Nigeria, it is only one commodity, and it is not renewable. At some point in time, the reserves will dry up. You have to find something else to rely on. Therefore, the need to invest in agriculture becomes even more important. At least with agriculture, you are able to produce to feed your people. That is fundamental.

In Ghana, it is estimated that about 60% of its population is engaged in agriculture. That is interesting––60% of the population works in agriculture, and yet we still do not produce enough to feed ourselves.

The reasons are not hard to find. Agriculture here is very fragmented—on a subsistence basis largely rain-fed, lack of technology, lack of access to appropriate finance structure, high cost of financing, and even access to farmland—these are the problems.

We have to look at the challenges as to why a country like Ghana, with 60% of its people in agriculture (that is 15.625 million), imports rice annually in the region of $500 million to $600 million.

It has always been the policy of government to invest in agriculture but it has never really happened because government always appears to be constrained by lack of funds.

I am not sure about what we have to learn from Nigeria. We have to learn from our own history. Even after independence, if I remember correctly, we used to have state-owned farms, and farmers brigades. Even as recently as 1975, people were encouraged to go into agriculture, even on a small scale in ones backyard.

If you look at Ghana, we have rich natural resources. We have huge tracts of fertile land, and fresh water bodies all over the place. We have enough to be able to produce. We have areas for the cultivation of rice, but that requires investments. That is where organizations like us come in handy, but we are also constrained because we do not have access to long-term financing to be able to invest in agriculture. We are in the market competing with all other banks for the same deposits.

Ghana’s economy urgently needs to diversify and value has to be added. How do you suggest that diversification and value-addition, and the increased consumption of goods produced locally be encouraged?

It has to be a partnership between government and the private sector. The private sector needs some kind of support from government. Not necessarily in the form of funds, but perhaps in the form of tax incentives.

This rhetoric has gone on over and over again—we should diversify, and we should eat what we grow and so on and so forth. It is easy to say “eat what you grow” but you do not have control over food choices, do you? The world is an open space now for everybody. People have choices, much better choices. What we must do is produce goods that will be as good as the ones we import, and make them competitive in terms of pricing.

For example, if one can produce poultry products here at cheaper costs that can compete with the imported product from another country why would consumers want to buy imported ones and not patronize those produced here?

You just have to make your product attractive and competitive.

So you mean it is a question of educating the public about the local products’ qualities and benefits?

In every country, there will be a particular produce that you think you can market as your brand, and say that “here, these are the benefits”. You market the benefits rather than the functionality.

We produce a lot of brown rice in the local areas, and medically everyone knows that brown rice is very good and very nourishing. People also know that too much polished rice also has its challenges. There should be an opportunity there for us to educate people. In order to educate people, we can start feeding our own school children and people in state institutions with the local brown rice, develop that taste and habit from there.

Bearing in mind Ghana aims to become a middle-income country in the coming years the inclusion of the finance sector is critical. How are the stakeholders and the Agricultural Development Bank (ADB) working towards educating the population about the benefits of being included in the financial sector?

A significant amount of the Ghanaian population does not have banking relationships. I am not too sure about the specific number, but there are a good number of Ghanaians. We have 27 banks, but most of the banks are operating in the cities. If you go to the rural areas you cannot find them, so how do you expect rural residents to access them?

Until 2009, ADB had only 55 branches. Of those, about 88% were located in the southern part of the country. In the northern part of the country, which is about 30% of the surface area of the country, we had only 3 branches of ADB and the area is predominantly agricultural.

Today, we have 78 branches, but we have more than 200 districts. We need to make banking more accessible to the entire population.

Is that part of the 2014/2016 plans?

It is. We need capital to be able to reach out to more people. That also gives us the opportunity to create employment. For every new branch opened that is a guaranteed employment for at least 4 persons. Imagine that ADB has the capital to open another 100 branches (if at all possible), That is employment opportunity for at least 400 persons.

ADB has a long history dating back to 1965, but we can say it was reborn in 2009 when you took over as new MD. Since then, thanks to your input the bank has been awarded both nationally and internationally. In 2010 you were recognized as the Agribusiness Bank of the Year in Africa, Bank of the Year in Ghana in 2010 and 2011 and in 2013 alone, the Bank won 15 awards locally and internationally. Long story short, ADB has won over 30 prestigious international awards conferred across the globe between 2010 and 2013. When you presented the new logo you said it is always good to take a look back and determine what changes are required to keep an organization in tune with developments within its environment. Please tell us what were the main challenges you saw when you took over office and what would you say was the key to success in improving the bank’s operations in such a short time?

The bank was established in 1965 to essentially finance agriculture and the rural economy. Subsequently, in 2004, the various classification of banks disappeared and they all became universal banks. Prior to that, we had development banks, commercial banks, and merchant banks.

Prior to 2009, the bank had largely operated the same business model since 1965. Even though we were supposed to be an “Agricultural Development Bank”, there was no dedicated department for agricultural finance. The Corporate Organizational Structure was tall and top-heavy.

The first thing we did in 2009 was to review the business model and to determine whether it was still relevant for the modern trends. This culminated in the development of a new Strategic plan (2010-2012). Following that review we developed a new model, which was aligned to the structure. We created a dedicated agricultural financing unit and established an asset finance unit. We did this because one of the challenges for the agricultural sector is lack of access to machinery, plant and equipment so there was a need to provide a financing lease arrangement.

We also created a dedicated retail department, because like it or not, the banking space here is largely retail, so we needed a retail offering.

The IT platform also needed to be upgraded because we inherited an operating software which was at end of life and Personal Computers & Servers were also obsolete and needed replacement and so it was important that we invested heavily in this area.

Having done this, it was important to ask ourselves whether we had the right skills set to deliver the new strategy. We went to the market and recruited people, who shared our vision, to occupy positions that we couldn’t fill internally.

We had a lot of leakages which we took steps to block. For example, we had 55 branches, and yet we had 65 cash vans, and each one had a driver and moved every day. In addition, we had 142 or so pickups, and each one had a driver and moved every day. Furthermore, we had bulk cash tellers. We decided that these were non-core functions and so we outsourced them and made significant savings as a result.

These were some of the initiatives we put in place to improve the performance. We have not had any injection of capital since we have been here, but the efficiency that we brought in is what has brought us this far.

Now, we have gotten to that stage where we need big capital to be able to do the big things so that we can consolidate our achievements and be able to venture into new areas such as being able to increase our spread to where we needed to be.

If you look at our customers, most of them are in the rural areas, but most of them also need access to housing.

It is important to increase the spread of our presence through ATMs. If we can place ATMs away from branches, then we can encourage self-service. That way, only those who need to come to the banking halls would do so and thus reducing congestion.

Some of the key points of our strategy include continuously upgrading our IT platform to make us efficient, expanding our network, deepening our product offering, and investing in our human resources.

Hon. Deputy Minister Ricketts-Hagan told us about your IPO project that will help ADB to enhance its performance and to be repositioned to operate with a much bigger capital base. How will this IPO affect your customers, stakeholders and the country in general?

For the customers, it is an opportunity to do bigger business with them. We are currently constrained as to how much we can lend to a borrower for secured lending. As per the Bank of Ghana regulation, a bank can only lend 25% of its networth. The bigger your base, the more you can do. It allows you to participate in bigger transactions (even if you are doing syndication for corporate banking or wholesale banking).

For stakeholders, obviously, once we are on the stock exchange there has to be more openness and transparency, as well as accountability on the part of the board and management.

For the country, it will be sending the signal that a purely public institution can also operate within the confines of international best practices.

While we do that, it also gives us access to the international capital market to be able to raise long-term loans, for example we can go to European Investment Bank, we can go to AFDB, and access facilities that otherwise we are restricted from.

We can do more if we are on the stock exchange. Our mere listing on the stock exchange gives other organizations confidence and comfort. The rules and regulations of the stock exchange require organizations to perform in a certain desired manner..

During the Agro Processing Compliance World Forum that took place in London last March Boakye Acheampong - Director for Millennium Leadership Forum said “we work toward our common goal of addressing the current dynamic changing market conditions within the agricultural industry.” What are the international market trends that directly affect the Ghanaian agricultural sector?

Fair trade is one and Ghanaian exporters meeting E.U standards is another. Most of the operatives in the agricultural sector are unable to produce goods to meet the E.U standards. Maybe we, as financers, are also to blame. We probably stop our responsibility from the point of financing rather than going beyond to make sure that the marketing end is also up to standards.

We know ADB is a very concerned bank with well-established CSR policies. In which sectors are you focused on?

We are looking at health and education, as well as the rural economy. They need help. That has always been my view and that is what I stand for, and that is what drives our CSR policy. We will continue to do more.

How could the FDI from Britain serve to enhance Ghana’s initiatives, and how could it be further encouraged?

Capital has a choice. Capital will go where it feels safe. To attract more FDIs, then the economic situation of the country at any point in time must be attractive.

As for our main sources of FDIs from Britain, we have a huge Ghanaian population there. That is the most significant source of inflows. They would continue to send money to Ghana if two things exist. First, they must be gainfully employed and earn income in order to be able to send funds here. Secondly, the environment here should be stable enough for people to be interested to invest in, and the flows will come.

Non-Ghanaians who are residents in the UK should have opportunities to be able to earn revenue to be able to bring in money.

It is about what we do here and how we brand our country. It is important for Ghana to rebrand. We have to know what we want to present as a nation. That is what will bring in the FDIs.