The Bank of Ghana has issued a policy to promote and guide the development and use of crowdfunding products and services for the banking sector.
This is in line with the Central Bank’s commitment to promote the modernisation of the banking industry, in a manner that meets the needs of diverse groups of people, so as to promote financial inclusion.
Additionally, this policy will promote innovative digital crowdfunding solutions that comply with “data protection and customer privacy regulations, good governance and accountability, relevant Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) norms, liquidation procedures and the protection of contributors’ interest,” the Bank of Ghana added.
In our local context, the Bank of Ghana reveals that crowdfunding is known as “susu”, “nnoboa” or “ntoboa”, and involves the collection of funds, usually in small amounts from individuals, to support projects or causes. It has been traditionally employed by families, groups or communities to mobilise money to meet the needs of their members.
Models of crowdfunding currently permitted under Bank of Ghana’s policy are donation-based and reward-based crowdfunding. These models entail the collection, holding and disbursement of funds, and are available to banks, Specialised Deposit-Taking Institutions (SDIs), Dedicated Electronic Money Issuers (DEMIs) and Enhanced Payment Service Providers (EPSPs).
“In the case of DEMIs, merchant wallets must be created and dedicated to the collection of donations. However, the EPSP will require the support of a bank or SDI to fully deliver the service since they do not issue electronic wallets or accounts to their customers”.Bank of Ghana
In addition to the models stated above, there are other variants of crowdfunding such as Debt ‘Peer-to-Peer lending’ and Equity models which deal with securities and loans and leverage payment platform for the collection and disbursement of funds.
Crowdfunding is commonly used amongst the informal sector groups including market women, farmers, fishmongers, traders, to mention a few, as an instrument in the mobilisation of critical funds to meet the pressing needs of members. For instance, to raise capital for businesses, payment of medical bills of vulnerable persons, development contributions, funeral donations and children’s education.
With the introduction of mobile money, associations and corporate entities have found crowdfunding to be an efficient channel for collecting donations and for raising funds.
“This development signals the potential of digital platforms in transforming the traditional crowdfunding model to enhance its contribution to the implementation of the National Financial Inclusion Strategy and the Digital Financial Services Policy objectives of the country”.Bank of Ghana
A number of laws have been passed and directives issued to position the financial sector to leverage digital technology for inclusive growth within the last ten (10) years. Among these laws are the Payment Systems and Services Act 2019 (Act 987), the Data Protection Act 2012 (Act 843), Banks and Specialised Deposit Taking Institutions Act, 2016 (Act 930), the Securities Industry Act, 2016 (Act 929) and the Cybersecurity Act 2020. Collectively, they provide the legal basis for digital delivery of crowdfunding products and services, on which Bank of Ghana’s crowdfunding policy is anchored.
Finally, the Central Bank encourages the general public to access the crowdfunding products to be provided by regulated entities, for their donation needs, for improved disclosure, transparency and accountability.
“They [crowdfunding products] fall within both the regulatory jurisdiction of the Bank of Ghana and the Securities and Exchange Commission (SEC). To this end, the Bank of Ghana will collaborate with SEC to prevent possible regulatory arbitrage and to strengthen the stability of the financial system”.Bank of Ghana