Ghana : Bringing Savers and Investors Together

Abstract

After 10 years of successful adjustment, with real economic growth averaging 5 percent per year, Ghana's recorded savings and investment rates remain very low - even by sub-Saharan African standards. However, survey evidence suggests that actual savings and investment rates are much higher than recorded rates. National accounts statistics do not capture a large part of the underlying savings and investment activities of the household, rural, and informal sectors. Comparative financial indicators confirm that Ghana's financial system is not very deep and as a result not fully contributing to economic growth. Ghana's broad money holdings are small relative to GDP when compared to other countries with similar per capita income. Also, currency holdings are relatively large, suggesting that Ghanaians prefer cash to bank accounts. Meanwhile, the bulk of financial savings has financed public sector deficits, leaving little for private investment finance. There is considerable evidence that many household savings are invested in real assets yielding zero, or negative, returns. Widespread lack of trust in formal financial channels makes these nevertheless the preferred form of investment. Ghana can grow faster with existing savings by improving the efficiency of investments through enhanced finanical intermediation.