Ponzification & The Ghanaian Financial Industry

Over the last five years, the turnover of Ghana’s financial industry has grown from $1.6 Billion to $3.5 Billion, and thus from 5% of the economy to 8% of the economy (in GDP terms).

Comparatively, this is higher than the US financial industry’s 7.3% contribution to US economic output, but less than the 12% recorded in the UK. But both the US and the UK have highly globalised financial sectors so these countries may not be the most appropriate benchmarks.

Curiously though total financial industry assets in Ghana constitute less than 40% of GDP, compared to the equivalent of 300% of GDP in South Africa, where the sector’s contribution to economic output is about 10% (together with insurance and real estate, the total carves up a share of about 24% of GDP). Same phenomenon is seen in the UK where total banking assets amount to considerably more than 350%.

Which brings me to my main point. The average total banking assets as a percentage of GDP for so-called middle-income sub-Saharan African countries is 99%. In Kenya, a country that is actually sub-par in this area, for example, it is 65%. Financial services’ share of GDP in Kenya is 9.2%, admittedly higher than Ghana’s, but then total financial industry assets are almost twice that of the Ghana, which is the trend among most relatively sophisticated economies even in our own region.

Unless someone has a deeper explanation, the only way to account for this super-high efficiency in converting assets to income as witnessed in Ghana is PONZIFICATION, which must have led to outsized interest income throughout the system.

No, I am *not* being reckless.

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