Editorial: Upgrade systems, commercial banks directed

Commercial banks in the country have been urged by the Bank of Ghana (BoG) to urgently upgrade their core banking systems.

This has become neccessary because most existing platforms “may not be compatible” with the technical and governance standards required for non-interest banking as the regulator prepares to introduce a dual-licencing framework for the sector.

Head-Banking Supervision Department (BoG) Ismail Adam, at a recently-held capacity-building programme on non-interest banking, said banks must begin immediate technical assessments rather than wait for finalisation of regulatory directives.

Conventional banking systems -built to support interest-based lending and deposit structures – are unlikely to adequately handle the asset-backed, risk-sharing and profit-sharing models which underpin non-interest finance.

This initiative marks the first time the central bank is mainstreaming a regulatory framework for non-interest banking since the concept was recognised under the Banks and Specialised Deposit-Taking Institutions Act (Act 930) in 2016.

Under its proposed regulatory structure, the central bank plans to issue two distinct licences. The first will permit conventional banks to operate non-interest ‘windows’, enabling them to offer non-interest financial products alongside their traditional interest-based business.

Meanwhile the second licence will apply to full-fledged non-interest banks, which will operate entirely within the non-interest framework.

The model is designed to foster competition and innovation while preventing market fragmentation by ensuring regulatory consistency across banking, insurance and capital markets.

Mr. Adam noted that successful implementation will depend heavily on the technical and managerial preparedness of banks. Institutions are encouraged to partner with the Chartered Institute of Bankers’ new non-interest banking education programme.

Prof. John Gatsi, an advisor to the Governor with emphasis on non-interest banking, said global and regional demand for non-interest financial products is rising sharply – with Kenya, Nigeria, Tanzania and Togo already issuing non-interest bonds and deepening market activity.

Meanwhile, the acting Director-General of the Securities and Exchange Commission, Dr. James Klutse Avedzi, said non-interest finance presents Ghana with a fresh avenue for mobilising long-term capital, particularly for critical infrastructure.

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