The Bank of Ghana (BoG) on 9 December released its Exposure Draft of the Guideline for the Regulation and Supervision of Non-Interest Banking Institutions (NIBI).

In the guidelines, the central bank announced a 60% convertible currency capital requirement for foreign banks under non-interest banking and deployed it strictly into Shariah-compliant financial instruments.

The announcement was made publicly on the BoG’s official website.

Parts of the guideline which are listed under the sub-topic, “Minimum Paid-Up Capital and Fees” in the 25-page document, read “In the case of foreign ownership of a NIBI, not less than 60% of the required

capitalisation or contribution shall be brought into Ghana in convertible currency. The capital shall be invested in non-interest-bearing instruments,” while the central bank reiterated its authority to decide and announce, in an official notice, how much starting capital and what application fees Non-Interest Financial Institutions must have before they can operate.

“Pursuant to its regulatory authority, the Bank shall determine and specify, through official notice, the requisite minimum paid-up capital and application fees for all Non-Interest Financial Institutions,” BoG added.

Currently, Ghana has no operating non-interest bank. The first time an official proposal for the establishment of one was made was in 2017 by the then Governor of the Bank of Ghana, Dr Johnson Asiama. He announced that a proposal was being prepared for submission to Parliament to pave the way for implementation.

Consequently, as the country moves to allow NIBIs, the central bank says this approach is to ensure stability, guard against currency and liquidity risks, and strengthen the resilience of operators within an industry that continues to attract new entrants.

Also, before an entity can apply for a non-interest banking license, it is expected of it to write to the BoG governor indicating the type of license being requested.

“An application for a NIB licence shall be made in writing to the Governor, Bank of Ghana. The application shall indicate the type of NIB licence being applied for (full-fledged or window). The application shall be accompanied by the documentation specified by the Bank. As part of the licensing procedure, NIBIs may have technical partners that shall be approved by the Bank.

GUIDELINE-FOR-THE-REGULATION-AND-SUPERVISION-OF-NON-INTEREST-BANKING-091225Download

On licensing requirements, BoG detailed that only institutions formed under the Companies Act, 2019 (Act 992) will be granted the right to operate, while persons interested in operating the same will only be required to do so when approved by its outfit.

“Pursuant to Act 774, Act 930, and Act 1032, a person who seeks to carry on a NIB business shall be a body corporate formed under the Companies Act, 2019 (Act

992). No person shall carry on the business of NIB unless licensed by the Bank. A person who seeks to carry on a NIB business shall apply in writing to the Bank for a licence”, the document noted.

The guideline, anchored in Act 930 and Act 1032, mandates that all non-interest operators conduct their financial, investment, trading, and commercial activities strictly in line with recognised non-interest financial principles.

It also outlines governance standards, permissible financing contracts, and the operational framework for the Non-Interest Financial Advisory Council and the Non-Interest Banking Advisory Committee.

BoG continued that licensing conditions for non-interest banking may be revised and could impact pending applications, adding that reliance on external agencies and verification requirements may also slow the approval process.It said, “The above conditions for non-interest banking licenses are subject to review and

could affect the pending application. The Bank relies on other agencies, both local and external, in the processing of applications, and this could cause delays in the processing of applications.

Where a document submitted to the Bank is not in the English language, the

document shall be accompanied by a certified translation in English. The Bank may require that the information supplied can be verified, certified or otherwise authenticated in the manner that it may determine”.

Final licences will only be issued after institutions settle the required licensing fees, and all operators will pay annual supervisory fees by January 31.

The BoG will also reserve the discretion to impose additional capital buffers where necessary.

For institutions that intend to run a fully fledged NIBI, BoG expounded that, “The name of the institution shall be a duly registered name under Act 992. In addition, the documentation shall comply with sections 13, 21 and 23 of Act 992. The names, addresses, occupation, curriculum vitae, including business and professional history, certified financial positions and corporate affiliations of the members.

“A list of all shareholders and ultimate beneficial owners of the applicant, and for each, their names, the respective values of the shares they hold in the applicant (and whether such shares are fully paid up), addresses, occupations (in case of individuals), authorised business (in case of corporate bodies), professional or business history, certified financial positions, Tax Identification Number (TIN), tax clearance certificate and corporate affiliations.”

Meanwhile, about four months ago, BoG announced a ‘name and shame’ approach to promote responsible borrowing among wilful loan defaulters in a new directive. The financial institution announced this in a formal directive issued to all regulated financial institutions on August 14.

In the new directive, the Bank of Ghana instructed all regulated financial institutions to publish the names of individuals who deliberately refuse to repay loans (wilful loan defaulters), despite having the means, twice a year in national newspapers and on their websites.

“All banks and other regulated lenders will be required to publish the names of such defaulters twice a year, on June 30 and December 31, in at least two national newspapers and on their official websites, using a format provided by the BoG.”

These measures form part of BoG’s latest regulatory actions to curb rising non-performing loans (NPLs) and reduce risks to the profitability, liquidity, and solvency of the banking sector. The central bank has already notified all regulated financial institutions of the directives and published explanatory notes for the public.