BoG to Channel remittances into investments through new Banking products

The Bank of Ghana has announced plans to collaborate with commercial banks to develop investment-linked remittance products designed to channel a larger share of diaspora inflows into productive sectors of the economy, including business expansion, infrastructure development, and long-term capital formation.

Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, said the initiative is part of broader efforts to take advantage of improving macroeconomic conditions and a strengthening banking sector to deepen financial markets and support sustainable economic growth.

Speaking at a post-Monetary Policy Committee engagement with chief executives of banks in Accra, Dr Asiama explained that the central bank will work with product teams across the banking industry and other stakeholders to design mechanisms that convert remittances from consumption-driven inflows into investment-oriented funds.

He said: “By creating innovative investment-linked remittance products, we can mobilise a larger share of these flows toward business expansion, infrastructure development and long-term capital formation.”

According to him, the strategy is expected to strengthen financial intermediation, enhance economic resilience, and support long-term growth.

The proposal comes at a time when Ghana’s external position continues to improve. The country recorded a current account surplus of US$3.1 billion in the first quarter of 2026, driven by strong export earnings from gold and cocoa as well as steady remittance inflows.

Gross International Reserves also increased to US$14.4 billion, representing 5.7 months of import cover, providing a stronger buffer against external shocks.

Dr Asiama noted that the initiative aligns with the central bank’s broader objective of encouraging banks to increase financing for productive sectors as macroeconomic stability improves.

He urged commercial banks to focus more on their core intermediation role by directing credit toward manufacturing, agriculture, services, and export-oriented businesses.

He further encouraged banks to take advantage of declining interest rates, financial technology advancements, and improved economic stability to develop innovative products for households and businesses.

The governor also called on banks to expand beyond lending by offering advisory services, supporting entrepreneurship, and helping firms access new markets, including export opportunities through strategic partnerships.

The announcement comes amid signs of economic resilience despite global uncertainties. The Monetary Policy Committee recently maintained the policy rate at 14 percent, citing balanced risks to inflation and growth.

Dr Asiama said the decision aims to preserve price stability while supporting economic recovery and private sector credit expansion.

Inflation remains relatively contained, with headline inflation rising slightly to 3.7 percent in May from 3.2 percent in March, marking the first consecutive monthly increase since December 2024. However, core inflation continues to decline, indicating subdued underlying price pressures.

Economic activity has also strengthened significantly. The Bank of Ghana’s Composite Index of Economic Activity grew by 12.6 percent in March, compared to 2.3 percent in the same period last year, driven by stronger credit growth, industrial production, trade, and consumption.

Fiscal performance has improved as well, with Ghana recording a fiscal surplus of 0.1 percent of GDP in the first quarter, supported by expenditure control and fiscal discipline.

The banking sector has shown notable gains, with total assets rising by 26.6 percent year-on-year to GH¢493.9 billion. The Capital Adequacy Ratio also improved to 22.3 percent from 17.5 percent a year earlier, while the non-performing loan ratio declined to 18.0 percent from 23.6 percent.

Despite these gains, Dr Asiama cautioned that credit risks remain elevated and urged banks to strengthen lending standards and recovery processes while complying with regulatory reforms aimed at reducing bad loans.

The Bank of Ghana is also advancing regulatory reforms, including six draft guidelines on liquidity risk management, stress testing, recovery planning, and capital adequacy frameworks, currently under industry consultation.

Dr Asiama emphasized that the key challenge for policymakers and financial institutions is transforming macroeconomic stability into broad-based economic prosperity.

He said mobilising remittance inflows into investment products, alongside increased bank financing for productive sectors, could provide the long-term capital needed to drive business growth, exports, and national development.

“The challenge before us is not just to maintain stability, but to convert that stability into prosperity,” he said.