This, they believe is stifling growth within the sector and negatively impacting efforts being made to achieve financial inclusion.

This was brought to the fore at a stakeholder forum co-hosted by the Ghana Technology Chamber and the Ghana Chamber of Telecommunications, with support from the Consultative Group to Assist the Poor (CGAP) and the State Secretariat of Economic Affairs of Switzerland (SECO) on the theme: “New DFS Products and how they are being enabled.”

Alluding to this, a Financial Sector Specialist at CGAP, Mr. Kwame Oppong said: “This is a great product [digital credit] in high demand, with available solutions that are quick in addressing people’s needs and don’t have non-performing Loans as high as traditional banks do. The problem is when the banks FinTechs work with have to do their monthly reporting to their regulator; suddenly they appear to have a big problem with their portfolio because of the product (digital credit).”

“This is something that FinTechs need to engage with the central bank on. It probably all comes down to a conservative approach to provisioning which basically makes the product look highly unprofitable. This is something FinTechs need to engage the bank of Ghana on to understand how they make provisioning for this,” he suggested.

Re-echoing this point, the Chief Executive Officer for Jumo, Mr. Arnold Elton Kavaarpuo said using existing infrastructure set out by the regulator in Ghana was affecting the ability of some banks to provide the needed support to FinTechs.

“One of the key things I will mention is the International Financial Reporting Standard (IFRS) 9 and how the reporting for instance will affect a 30-day product. This is important because, these are standards that are set up primarily for longer-term products and it makes things difficult,” he explained.

Cost making digital pensions space unattractive

CEO of IT Consortium, Mr. Romeo Bugyei lamented the cost involved in operating within the sector, indicating that for recurrent payments, lower end payments tend to cost more because of the way technology is set up.

“FinTechs run recurrent costs regardless of whether a transaction goes through or not. We need to push informal pensions whether it is to a farmer, house help or market woman and that makes it difficult,” he said.

According to him, when the New Pensions Act (2008) was put together, there was no money put aside for other channels like the Telcos and FinTechs, hence, making it difficult for them to make meaningful revenue.

“If the regulator can come in with a specific fee for our channels, it will help a lot. We need to have a discussion with the regulatory bodies and government that will include FinTechs because we can't get to the last mile without FinTechs,” he explained.

Financial inclusion; the regulator’s role

Stakeholders at the forum also acknowledged that the regulator had a crucial role to play in deepening financial inclusion especially, in backing their products to instill trust in the general public and make it easier for them to embrace these products.

“The presence of the regulator helps especially in this present atmosphere for people to know there is some authority backing the product,” Mobile Financial Services Manager at Vodafone, Mr. Carl Nikoi Ashie said.

Interpay Africa CEO, Mr. Saqib Nazir, added that assistance is greatly needed to push the agenda of reaching the informal sector, indicating that “we are working in the digital pensions space more out of passion than profit.”

Stressing on the importance of regulator backing, Mr. Bugyei said: “We had the regulators with us at the launch [of My Own Pension] and the assurance that the money sat with a bank, with the regulator having full oversight over it, gave a lot of comfort and confidence to prospective subscribers knowing that the product is fully backed by regulator.”

FinTechs are however, hopeful that the regulator would appreciate the ability of their products to be the mainstay for running other products, not just entry-level or access-level products but long-term products because they may have a better view of customers than traditional banks.

Looking into the future

Deputy CEO of the National Pensions Regulatory Authority (NPRA), Mr. David Abbey advised that it was key for recipients of DFS technology to understand what the law does for them.

“The technology should be simple for users and that helps. They need to know their rights and what the law does for them if something goes wrong. For me, the big issue is costs. Most of our informal load is in Accra and Kumasi. Because of the costs involved, it’s difficult to reach out to other segments of the informal sector like farmers who play a big role in the nation’s economy,” he said. 

He further talked about digital pensions and interoperability saying, “the issue of being able to port among providers is very crucial - can we make the movement seamless?”

Mr. Abbey subsequently mooted the idea of the government considering using pensions contributions as an instrument to rope in more people from the informal sector of the economy into the tax net.

“Can we tie in pensions contributions into tax payment so that a portion of tax paid goes towards a person’s pensions contribution? So you pay ‘X’ in taxes and have ‘Y’ out of that going towards their tax as a contribution,” he said

On his part, CEO of the Ghana Chamber of Telecommunications, Mr. Kenneth Ashigbey, in his submission touched briefly on the recently passed Payments Systems and Settlement Bill which is to regulate electronic payments and control financial institutions which offer electronic payment services in the country. He advised FinTechs to be active consumers of legislation and take steps to challenge portions of the Bill they believe will negatively affect their operations.

At the end of the forum, it was generally agreed that a lot more could be done on the part of both the regulators and the FinTechs to further improve the Digital Financial Services sector in the country.

Mr. Derrydean Dadzie of the Ghana Technology Chamber said: “I am confident that the more conversations we have, the more we can fine-tune our industry for prosperity.”