Adapting to the economic rhythms: How banks are managing seasonal financial fluctuations

By: Enoch K. AKUFFU-DJOBI

Seasonality has a significant impact on the operations, demand, and revenue cycles of many industries. For Ghanaian banks, seasonality can manifest as fluctuating customer activity, varying cash flows, and shifting financial needs.

From agricultural harvests to holiday spending sprees, Ghana’s distinct cultural and economic rhythms can have an impact on banking operations. Coping with these seasonal shifts necessitates creativity, adaptability, and a thorough understanding of the country’s economic pulse.

Banks have devised innovative solutions to weather year-round fluctuations in demand, ranging from cocoa harvest cycles to peak holiday spending. The following describes how Ghanaian banks are stepping up to the plate.

 Understanding seasonality in ghana’s economy

Ghana’s economy is diverse, but agriculture remains a key pillar, accounting for roughly 20% of the country’s GDP and employing more than half of its population. This sector is heavily influenced by the seasons, owing to agricultural cycles that rely on rainfall. Cocoa farming, one of the nation’s largest export earners, reaches its peak sales between October and December.

Similarly, maize, cassava, and other staple crops experience seasonal shifts, resulting in significant income variability for farmers and agribusinesses. It is worth noting that, in addition to agriculture, Ghana experiences other seasonal factors.

Retail banking experiences peaks during the Christmas season as Ghanaians increase their consumer spending and remittances from the diaspora. Businesses and consumers alike frequently tighten their belts in the early months of the year, following the extravagant spending of the holiday season.

 Impact of seasonality on banking operations

For banks like Ecobank, CalBank, Stanbic, and Absa Bank, seasonal patterns present both opportunities and challenges. During peak seasons, the demand for loans and credit facilities frequently increases. Farmers, for example, may need capital to buy fertilizer or hire labor during the planting season.

Similarly, as the harvest season approaches, businesses that purchase and export agricultural products require financial assistance to process and transport goods to international markets.

However, during off-peak seasons, there is frequently a lull in banking activity. Fewer deposits, reduced borrowing, and slower business activity can all have an impact on cash flow and liquidity in the banking sector. Such fluctuations necessitate careful management to ensure that banks remain solvent and profitable all year.

Strategies for coping with seasonality

To navigate these fluctuations, banks in Ghana have adopted several strategies aimed at smoothing out the peaks and troughs caused by seasonality. These strategies not only help banks remain stable, but they also enhance their ability to serve customers effectively during both busy and slow periods. Among these strategies are:

Tailored agricultural loan products

Recognizing the cyclical nature of agriculture, some Ghanaian banks (Agricultural Development Bank (ADB), Ecobank, Stanbic) have introduced specialized agricultural loan products.

For instance, during planting seasons, banks provide short-term credit facilities with deferred repayment terms. Farmers can access these loans to buy seeds and equipment, with flexible repayment structures that allow them to settle their debts after harvest when their cash flow improves. Examples include the “Agric Loan” from Stanbic Bank and the “Agric Input Support Scheme” by Ecobank, which are both designed to address the specific needs of farmers.

 Digital banking and mobile solutions

In the past decade, digital banking has revolutionized financial services in Ghana. To cope with seasonal changes, banks are increasingly relying on mobile banking solutions to reach customers in rural and semi-urban areas, particularly during peak farming seasons when people are busy in the fields.

For instance, banks such as Fidelity Bank and Access Bank have embraced mobile money platforms like MTN Mobile Money and AirtelTigo Money, which allow customers to perform banking transactions remotely. Farmers can receive payments for their produce, make purchases, and even apply for loans without needing to visit a physical branch.

This digital shift also helps banks maintain steady customer engagement during off-peak periods, encouraging users to save regularly, apply for personal loans, or invest in various financial products at their convenience.

 Flexible loan repayment plans

One of the most significant innovations in Ghana’s banking sector has been the implementation of flexible loan repayment plans based on customers’ seasonal income patterns. For example, farmers and small businesses may be able to make larger repayments only after harvest or during the holiday season.

Understanding this, banks such as the Agricultural Development Bank (ADB) have developed products with repayment schedules that are tied to seasonal cash inflows, ensuring that customers can meet their obligations without defaulting during low-income periods.

Holiday and festive loans

Banks see an increase in demand for consumer loans around Christmas and Easter as Ghanaians prepare for travel, gifts, and celebrations. In response, many banks provide short-term festive loans, allowing customers to borrow at low interest rates with the understanding that they will repay after the holiday season.

Standard Chartered Bank’s “Christmas Loan” and GCB’s “Festive Loan” are examples of tailored products that not only meet the demands of seasonal spending but also keep banks’ cash flow stable during periods of high expenditure.

Seasonal marketing and promotions

Another effective strategy is to run seasonal marketing campaigns. Banks use the holiday season to promote savings accounts, insurance policies, and investment products with discounts and promotions. For example, during the “Back-to-School” season, some banks run promotions to encourage parents to save for their children’s education by providing special savings accounts with higher interest rates or bonuses.

Diaspora-focused banking services

With significant remittances from the Ghanaian diaspora during certain seasons, particularly Christmas and Easter, banks have developed diaspora-focused services. These include lower fees for remittance transfers, foreign currency accounts, and investment packages for Ghanaians living overseas.

This helps to smooth out seasonal income streams and provides a critical financial lifeline during times when domestic economic activity may be slow. Recognizing this, Ecobank and Access Bank have launched tailored diaspora banking services that include no fees and competitive exchange rates to encourage holiday remittances. This influx of foreign currency increases local bank liquidity and boosts economic activity.

Conclusion

Seasonality in Ghana’s economy is unavoidable, but with the right strategies, banks can thrive no matter what time of year. Banks in Ghana are well-positioned to deal with the challenges and capitalize on the opportunities that seasonal changes bring by developing flexible loan products, embracing digital banking, and tailoring financial services to their customers’ specific needs.

The ongoing development of financial technology (Fintech) and innovative banking solutions ensures that Ghana’s banking sector is resilient, responsive, and ready to support the country’s economic growth season after season.

In this ever-changing landscape, one thing is certain: banks that can adapt to Ghana’s cyclical economy will continue to play an important role in the country’s development and prosperity.

Enoch is a Chartered Accountant / Certified Banker with a deep passion for accounting, banking, and governance. His expertise spans both education and practice reflecting a commitment to research and knowledge sharing. He can be reached via [email protected]). Contact: 233244201383.

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