The licensing of several new universal banks in Ghana over the second quarter of 2017 brings greater competition to the country’s crowded market, although a hike in capital requirements may prompt consolidation.

In June, Accra-based Ghana Home Loans, an 11-year-old mortgage finance provider, received a universal banking license from the country’s regulator, the Bank of Ghana. Under the new license, Ghana Home Loans – which has since rebranded as GHL Bank – will provide a full range of lending and savings products when it begins full operations by the end of the year. However, GHL is not the only newcomer. June also saw Beige Capital Savings & Loans (BCSL), an SME-focused subsidiary of Accra-headquartered Beige Capital, receive a universal banking license.

The firm will build out its offerings under the new Beige Bank brand, converting all BCSL branches before the end of the year. A month earlier, the Bank of Ghana also granted a universal license to Construction Bank, a new entrant wholly-owned by Ghanaian stakeholders. The bank has the ability to provide a full suite of credit products, but statements by its board of directors indicate that it will primarily focus in the infrastructure and property sectors. The three new arrivals may soon be joined even more entrants. A number of other financial services firms have announced their intention this year to acquire universal licenses including Accra’s SIC Life Company and Natoa Micro-finance Services, which is based in Mankessim, between Cape Coast and Accra.

These banks will be entering a highly fragmented banking sector. In a country with a population of 28 million people, 37 universal banks are currently in operation in Ghana. By comparison, South Africa and Nigeria – with populations of 55 million people and 180 million people respectively – have just 27 and 22 universal banks. The crowded field is likely to thin out however, should the BoG announce a long-anticipated increase in minimum capital requirements.

The existing requirement, which has been in place since 2012, sits at GHS120 million ($27.8 million), but media reports suggest that the new requirement would be increased to GHS200 million ($45.5 million) or higher. Should the hike go through, pressure for consolidation will increase, potentially opening the way for mergers and acquisitions and reducing the number of universal lenders. In spite of the high level of competition, the Ghanaian banking sector has performed well over the last twelve months with Bank of Ghana data indicating a growth in total banking assets from $14.7 billion in April 2016 to $19.3 billion one year later. This has been partly driven by a 28.4% rise in client deposits over the same period, largely facilitated by increased confidence in the economy under the new government and reductions in the base rate to 22.5%. Increased domestic borrowing by the government has also contributed significantly to the numbers.The licensing of several new universal banks in Ghana over the second quarter of 2017 brings greater competition to the country’s crowded market, although a hike in capital requirements may prompt consolidation.

In June, Accra-based Ghana Home Loans, an 11-year-old mortgage finance provider, received a universal banking license from the country’s regulator, the Bank of Ghana. Under the new license, Ghana Home Loans – which has since rebranded as GHL Bank – will provide a full range of lending and savings products when it begins full operations by the end of the year. However, GHL is not the only newcomer. June also saw Beige Capital Savings & Loans (BCSL), an SME-focused subsidiary of Accra-headquartered Beige Capital, receive a universal banking license.

The firm will build out its offerings under the new Beige Bank brand, converting all BCSL branches before the end of the year. A month earlier, the Bank of Ghana also granted a universal license to Construction Bank, a new entrant wholly-owned by Ghanaian stakeholders. The bank has the ability to provide a full suite of credit products, but statements by its board of directors indicate that it will primarily focus in the infrastructure and property sectors. The three new arrivals may soon be joined even more entrants. A number of other financial services firms have announced their intention this year to acquire universal licenses including Accra’s SIC Life Company and Natoa Micro-finance Services, which is based in Mankessim, between Cape Coast and Accra. These banks will be entering a highly fragmented banking sector.

In a country with a population of 28 million people, 37 universal banks are currently in operation in Ghana. By comparison, South Africa and Nigeria – with populations of 55 million people and 180 million people respectively – have just 27 and 22 universal banks. The crowded field is likely to thin out however, should the BoG announce a long-anticipated increase in minimum capital requirements. The existing requirement, which has been in place since 2012, sits at GHS120 million ($27.8 million), but media reports suggest that the new requirement would be increased to GHS200 million ($45.5 million) or higher. Should the hike go through, pressure for consolidation will increase, potentially opening the way for mergers and acquisitions and reducing the number of universal lenders.

In spite of the high level of competition, the Ghanaian banking sector has performed well over the last twelve months with Bank of Ghana data indicating a growth in total banking assets from $14.7 billion in April 2016 to $19.3 billion one year later. This has been partly driven by a 28.4% rise in client deposits over the same period, largely facilitated by increased confidence in the economy under the new government and reductions in the base rate to 22.5%. Increased domestic borrowing by the government has also contributed significantly to the numbers.