The informal credit delivery sector in Ghana comprises unregulated financial activities that provide credit outside formal banking systems. As a senior banker with experience at institutions like Ecobank Ghana, I’ve seen how this sector fills gaps left by formal banks, especially post-2017 cleanup and during the 2022-2024 DDEP challenges.

Identification of the Informal Credit Delivery Sector

• Key Players and Types:
  • Moneylenders (Susu Collectors): Individuals or small groups offering short-term loans at high interest rates (often 20-50% monthly). They operate on trust, collecting daily savings (susu) and providing credit without collateral.
  • Rotating Savings and Credit Associations (ROSCAs): Groups where members contribute fixed amounts periodically, and funds are rotated as loans or lump sums (e.g., “adashi” in northern Ghana).
  • Informal Microfinance Groups: Community-based lenders, including village savings and loan associations (VSLAs), supported by NGOs like CARE Ghana.
  • Pawnshops and Trade Creditors: Shop owners or traders extending credit against goods or future sales, common in markets like Makola in Accra.
  • Fintech Informal Elements: While regulated fintech grows under the Payment Systems and Services Act, 2019 (Act 987), unregulated peer-to-peer lending apps persist.

This sector is unregulated by the BoG, lacking adherence to Acts like 930, leading to risks but high accessibility.

Discussion of Its Importance to Ghana’s Economy

• Financial Inclusion: Serves the unbanked (about 40% of adults as of 2023 Findex data), especially in rural areas where formal banks are scarce. It enables small-scale farmers and traders (e.g., cocoa farmers in Ashanti region) to access credit for inputs, boosting productivity amid post-DDEP liquidity squeezes.
• Economic Growth and Employment: Fuels SMEs, which contribute ~70% to GDP and 85% to employment (Ghana Statistical Service, 2024). Informal credit supports market women and artisans, enhancing trade and reducing poverty. For instance, during the 2020 COVID-19 lockdowns, informal lenders provided quick funds when banks tightened lending per BoG’s Liquidity Risk Management Guidelines.
• Complement to Formal Sector: Acts as a bridge, with some informal savers graduating to formal accounts. BoG’s sustainable banking principles (2020s) encourage integration, like licensing microfinance institutions. It absorbs shocks, e.g., during 2017-2019 bank collapses (UT Bank), maintaining credit flow.
• Risk Management and Innovation: Offers flexible terms without bureaucracy, promoting entrepreneurship. However, high rates pose risks; BoG’s fintech regulations aim to formalize parts for better oversight.
• Challenges and Regulatory Context: Vulnerabilities include exploitation and defaults, as seen in cases of moneylender disputes. Post-2022 DDEP, informal sector grew due to bank recapitalization strains (e.g., Notice No. BG/GOV/SEC/2023/05). Importance lies in resilience, but integration via BoG directives could enhance stability.

In practice, banks like GCB partner with informal groups for outreach, aligning with Basel III-adapted principles for inclusive growth.