The Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP) Dr. Mahamudu Bawumia, has highlighted his vision for transitioning Ghana from a cash-based economy to a credit-based system.
Dr. Bawumia emphasized the need to modernize Ghana’s financial system, drawing comparisons to advanced economies like the United States and the United Kingdom. Dr. Bawumia pointed out that this transition is critical for alleviating the financial pressures on Ghanaian workers, particularly teachers and journalists.
One of the key points Dr. Bawumia stressed was the disparity between the purchasing power of a Ghanaian teacher and that of a teacher in the UK or US. Dr. Bawumia explained that while both may pay the same amount for goods, teachers in the UK can consume far more due to their access to credit.
According to Dr. Bawumia, this disparity is a result of the cash-based system in Ghana, which requires individuals to accumulate the full amount of money needed for large purchases upfront rather than paying in installments over time in UK.
“In Ghana, if you want to buy a car costing 100,000 or 150,000 you have to look for the full amount to pay for it…But in the UK, you might only need to pay 1,000 every month. This allows your salary to go much further.”
Dr. Mahamudu Bawumia the Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP)
This comparison highlights the core issue with Ghana’s current financial system and underscores the importance of shifting towards a credit-based economy.
According to Dr. Bawumia, one of the critical aspects of a credit-based system is the ability to compute credit scores for individuals Credit scoring. Dr Bawumia’s emphasis is essential for assessing the risk of lending to borrowers and for making credit accessible to a broader section of the population.
“The reason why the credit-based system works in advanced countries is because they can compute credit scores for everybody, Credit scoring is key to a credit-based system because it assesses the risk of any borrower intending to borrow.”
Dr. Mahamudu Bawumia the Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP)
Monetary Policy and Financial Sector Reforms
Dr. Bawumia also reflected on his past work on monetary policy and financial sector reform in Africa, which he documented in a book 14 years ago. Dr. Bawumia argued for the need for Ghana and Africa to adopt credit-based systems to reduce financial stress and improve living standards. Dr. Bawumia pointed out that a credit-based economy is feasible when the necessary infrastructure, such as unique identities, digital addresses, and financial inclusion is in place.
Dr. Bawumia explained the steps taken by his government to lay the groundwork for this transition. He emphasized the importance of a digital address system and the Ghana Card as critical elements for enabling credit scoring. Dr. Bawumia said he quickly recognized the limitations of the traditional address system and pushed for the adoption of a digital system. At that time, Mongolia was the only country with a wholesale digital address system but Ghana has since become the second country in the world to implement one.
“We needed to put in place a digital address system and the Ghana Card, which we have done… Now, every part of Ghana has a digital address. We are the second country in the world to achieve this after Mongolia.”
Dr. Mahamudu Bawumia the Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP)
Dr. Bawumia highlighted the significant strides made in connecting mobile money accounts to bank accounts through interoperability enabling financial transactions to be monitored and scored for credit purposes.
“When we came in, I realized that a very small percentage of people had bank accounts but a lot of people had mobile money accounts.”
“The key to getting everyone financially included was to have interoperability between mobile money accounts and bank accounts. Today, Ghana now has all the elements in place for a credit-based system.”
Dr. Mahamudu Bawumia the Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP
Despite the progress made, Dr. Bawumia acknowledged that individual credit scoring does not yet exist in Ghana, although efforts are underway to establish it. Dr. Bawumia expressed optimism that Ghana would soon be the second country in sub-Saharan Africa after South Africa, to have a fully functional credit scoring system. This system he asserted would make life easier for workers enabling them to purchase goods like cars, fridges, and televisions on credit, just as people in advanced economies do.
Dr. Bawumia expressed his anticipation that the credit scoring system would be operational before the end of the year. He noted that all the necessary elements were in place and that this transition would fundamentally change the financial landscape in Ghana.
“We are moving towards a credit-based system, and I expect to launch it reasonably soon because everything is now in place. This will bring down the pressure on all of our workers and improve the quality of life for Ghanaians.”
Dr. Mahamudu Bawumia the Vice President of Ghana and Flagbearer of the New Patriotic Party (NPP)
Dr. Bawumia’s vision for a credit-based economy represents a significant shift in Ghana’s financial system. By enabling access to credit and establishing a comprehensive credit scoring system, Ghana could alleviate the financial burden on its citizens paving the way for improved living standards and economic growth.
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