Bright Simons: World Bank Funding of Credit Scoring & Fintech falters in Ghana

One effect of Ghana becoming a “lower middle income country” a few years ago is that many donors retreated. The World Bank thus became the country’s most important strategic “development partner”.

The role of the World Bank in Ghana’s governance affairs thus require serious scrutiny from public policy analysts and activists.

In recent years, the World Bank has had to step in with large pots of money to support the government’s efforts to patch up the country’s banking and financial system due to the lingering effects of a mass shutdown of dozens of financial institutions and the ongoing fiscal crisis.

$250 million was allocated by the World Bank to support “financial stability” in Ghana. The separate “Financial Sector Development” effort was allocated $30 million for rollout of various initiatives to start in 2019.

Our careful review of results for this spending leaves much to be desired. The challenge here is that the selection of projects themselves was questionable yet those are matters of political judgement. Elected officials have the power and mandate to make these decisions. As civil activists and analysts, we are reduced to shouting from the sidelines.

1. The decision to fund the setup of a government-controlled (NIC, GSE & NPRA) Credit Rating Agency (CRAG), now stuck in limbo, when there are two private ones (Augusto & Co and Beacon), and others (like GCR and DataPro) had signalled entry, was completely misguided. CRAG commenced its license application in early 2023. Went on an executive and consultant hiring spree. And then, just like that, everything stalled. Point though is: the government’s vision was clearly to see more government bonds get ratings. Why should a government-controlled credit agency be rating government bonds? Why should any investor take their ratings seriously? Why not simply hire the private agencies setting up locally to do the rating as is done almost universally?

2. The decision to splurge 89% of all the financial stability money on state-owned banks that have long been mismanaged due to political interference was also misguided. Not when there are 3 private banks that have fallen on hard times due primarily to worsening fiscal conditions. Some of these struggling banks even have negative equity at this point and can’t afford regulatory fines. They, not the state-owned banks, should have gotten the money.

3. The plan to get ARB-APEX bank (a quasi-regulator & coordinator of Ghanaian community banks) to build a common app, as well as agency banking platform, for rural banks was relatively clever but implementation has been hard due to design gaps. 5 years on, uptake of the app, USSD code #992, and the industry-wide ERP is virtually nill. Our team went around places that are supposed to have these agents. None of the 5000 expected could be found. Testing of #992 shows far lower uptime than allowable. Insiders say that the target date for 80000 pilot phase users has now been missed repeatedly. Our interviews suggest that the top Rural Banks are focused on their own apps.

Quite surprisingly, but consistent with the pattern we have identified, the project has still been rated as doing well by the World Bank.

Whilst we intend to publish detailed case studies about all these World Bank projects in due course, we are also action-oriented. We intend to ramp up advocacy in coming months and years to change the culture of performance and accountability.

By Bright Simons, Vice President Imani Africa