The Economy of Ghana: Sixty Years after Independence, 2017
This chapter examines the structure of non-agricultural employment in Ghana over the last 60 year... more This chapter examines the structure of non-agricultural employment in Ghana over the last 60 years through the lenses of different models of enterprise development and informality. Ghana's post-Independence development strategy emphasized capital-intensive state-owned and import-substitution industries, which were not competitive and dynamic enough to sustain growth, let alone absorb the fast-growing, urbanizing labor supply. Increasing regulation and distortion of the economy in the 1970s fostered informalization of many economic activities. Despite liberalization in the late 1980s, employment in informal micro, small and medium enterprises (MSMEs) grew in concert with the overall economy. While formal wage employment (public and private) has recovered since 2006, informal enterprises provide more wage jobs, and informal selfemployment has surpassed agriculture in absorbing labour.
The World Bank’s ‘Comparative Review of Microfinance Regulatory Framework Issues’ concludes that ... more The World Bank’s ‘Comparative Review of Microfinance Regulatory Framework Issues’ concludes that ‘recognizing different tiers of both regulated and unregulated institutions in a financial structure facilitates financial deepening and outreach’, yet warns that ‘legislation intended to promote microfinance may impose untenable supervisory burdens, while an excessively restrictive approach may constrict innovation and expansion’ (Gallardo et al., 2005, p. iii). Ghana represents a regulatory framework that has evolved to permit several tiers of both regulated and unregulated institutions engaged in microfinance, sometimes facilitating new institutional forms and sometimes responding to evolution of the market. Indeed, Ghana has been an innovator since the introduction of the first African credit union in 1955 and the first rural bank in 1976. It offers a contrast to countries that have only in the last decade created regulated tiers suitable for microfinance (for example, Uganda, Kenya), sometimes severely restricting their form (West African Monetary Union, Ethiopia), or that leave regulation to apex bodies (Bangladesh, Philippines; Meagher, 2002).
Regulating microfinance is an art of balance between protecting depositors and enabling financial... more Regulating microfinance is an art of balance between protecting depositors and enabling financial inclusion. Experimentation with microfinance in the late 20th century fostered innovative approaches to financial inclusion of low-income populations around the world. Ghana was a pioneer in regulations that enabled microfinance in some types of licensed institutions, while tolerating other forms. In the early 21st century, for-profit microfinance took off in ways not intended by early promoters. This review paper analyses the consequences of waiting too long to rein in proliferating profit-oriented microfinance companies and failing to build capacity for regulation, resulting in lost deposits, public mistrust, and a painful delicensing exercise. It also draws on some recent empirical research to indicate implications for public perception and key success factors, leading to a recommendation that regulation be accompanied by measures to build capacity for successful transformation and supervision of microfinance institutions for both financial inclusion and sustainability.
All rights reserved Manufactured in the United States of America First printing April 1995 Discus... more All rights reserved Manufactured in the United States of America First printing April 1995 Discussion Papers present results of country analysis or research that are circulated to encourage discussion and comment within the development community. To present these results with the least possible delay, the typescript of this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the autho-(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries.
BDS interventions that subsidize transactions are often thought to hinder market development by s... more BDS interventions that subsidize transactions are often thought to hinder market development by signalling that BDS can be obtained at an artificially low price. The justification for voucher programmes has been that MSEs are offered the chance to try out training at a temporarily reduced price, and if service providers respond to this opportunity, MSEs' lack of experience of the benefits of training is overcome, and they continue to purchase training at a higher level in future. This article discusses the economic rationale for intervention, then considers how to measure the short- and long-term development effects of incentives such as voucher and matching grant schemes. This is illustrated through an evaluation of the development impact of a recently ended voucher programme in Kenya, which shows signs of success in creating permanent market expansion in BDS training for MSEs.
Unemployment problems in urban areas of less developed countries throughout the world have stimul... more Unemployment problems in urban areas of less developed countries throughout the world have stimulated increasing interest in analyzing the impact of wages on labor supply and demand and in formulating appropriate wage policies. The urban-rural wage differential is a significant variable in attempts to measure the determinants of labor supply through migration from rural areas (Beals et al., 1967; Greenwood, 1969; Knight, 1972; Rourke and Sakyi-Gyinae, 1972). The level and growth of wages relative to capital costs may influence the labor intensity of investment and production through substitution, and hence affect the rate of growth of employment (Fajama, 1973; Frank, 1971; Harris and Todaro, 1969; House, 1973; Maitha, 1973; Roemer, 1971, forthcoming; Senga, 1973). Increasing attention is being paid to inequalities and changes in the distribution of wages and income (Ewusi, 1971; House, 1975; McCabe, 1974) and to the trade-off between unemployment and wage or price inflation (Ajayi and Osayimwese, 1974). Many of these studies stress the importance for employment growth of wage restraint relative to the price of capital and relative to productivity and product price increases over time. Hence it is essential for governments under pressure both from unions and from unemployment to have an accurate measure of the level and growth of the appropriate wage when trying to make wage policy decisions.
Findings reports on ongoing operational, economic and sector work carried out by the World Bank a... more Findings reports on ongoing operational, economic and sector work carried out by the World Bank and its member governments in the Africa Region. It is published periodically by the Africa Technical Department on behalf of the Region. Small Enterprise Responses to Liberalization in Five African Countries Micro and small-scale enterprises (MSEs) can contribute to private-led growth in Sub-Saharan Africa through employment and income-earning opportunities and by quick response to changing policies, incentives and market conditions. This study, Small Enterprises Adjusting to Liberalization in Five African Countries, analyzes sample survey data from Ghana, Malawi, Mali, Senegal, and Tanzania about five years after they launched structural adjustment programs (SAPs). The data reveal that many MSEs were able to take advantage of the changed environment, while others were constrained by increased competition, financial difficulties, inputs, and the business environment. The surveys focused on established manufacturing activities, excluding self-employment and commerce. Responses to Adjustment The sample countries undertook significant macroeconomic reforms and liberalization of markets during the late 1980s, although initial conditions and subsequent performance differed. The reforms were more extensive in Ghana and Mali, less so in Tanzania and Senegal. Relative prices changed substantially in Ghana, Tanzania and Malawi under major exchange rate devaluations. Basic macroeconomic indicators improved in all these economies in the post-adjustment period compared to the years preceding SAPs. Ghana showed the largest turnaround, while Senegal's economic performance remained relatively weak. The positive effects of more market-oriented policies on MSEs include: * Access to inputs: The removal or reduction of import licensing in all sample countries gave MSEs greater access to imported inputs than previous licensing systems, which were biased toward large, influential companies. * Relative prices: Devaluations squeezed producers who relied mainly on imported inputs (a high
Documents de synthèse de la Banque mondiale Série du département technique Afrique Ajustement des... more Documents de synthèse de la Banque mondiale Série du département technique Afrique Ajustement des petites entreprises à la libéralisation de l'économie dans cinq pays d'Afrique
BDS interventions that subsidize transactions are often thought to hinder market development by s... more BDS interventions that subsidize transactions are often thought to hinder market development by signalling an artificially low price. The justification for voucher programmes has been that they overcome the information gap by offering MSEs the chance to try out training at a temporarily reduced price. If service providers respond to this opportunity, MSEs' lack of experience of the benefits of training is overcome, and they continue to purchase training at a higher level in future. This article discusses the economic rationale for intervention, then considers how to measure the short-and long-term development effects of incentives such as voucher and matching grant schemes. This is illustrated through an evaluation of the development impact of a recently ended voucher programme in Kenya, which shows signs of success in creating permanent market expansion in BDS training for MSEs.
It has been argued recently that implementing a laissez-faire approach to economic development fa... more It has been argued recently that implementing a laissez-faire approach to economic development faces serious difficulties in Africa.1 This article provides some empirical evidence on the question by comparing the recent efforts of two countries to move towards less interventionist policies. Both Zambia and Ghana attempted to reverse their deteriorating economic performance by introducing major reform measures during the mid-1980s. Their different experiences illustrate both the positive effects that laissez-faire policies can have when resource allocation has been constrained by extensive controls, and the difficulties of sustaining and financing a reform programme.
Economic Development and Cultural Change, Oct 1, 1981
The hypothesis that female employment opportunities in agriculture and traditional small-scale pr... more The hypothesis that female employment opportunities in agriculture and traditional small-scale production are diminished in the early stages of industrialization is refuted in the case of Ghana where female labor force participation has risen despite rapid industrialization. This paper analyzes the impact of industrialization on small-scale production and the predominance of women in such production. Female labor force participation increased from 57% to 64% in the 1960s while male participation declined from 89% to 84%. However sectoral analysis of employment patterns reveals that womens employment gains were restricted to the traditional sectors. The modern sector provided only 6% of new female employment compared with 61% of new employment for males. On the other hand agriculture absorbed 46% of the increased female employment but only 10% of increased male employment. Small-scale manufacturing accounted for 26% of the total employment increase in the 1960s. Female participation in these industries rose from 60-70% in 1962-70 whereas it fell from 23-18% in non-small-scale industries. These results suggest that modernization is needed biased against female employment; however there is no support in the case of Ghana for the hypothesis that modernization occurs at the expense of cottage industry. To utilize the resource of female labor power and to incorporate women into the development process policies need to be oriented toward generating demand for small-scale production and avoiding subsidization of competing large-scale firms.
The success that microfinance institutions (MFIs) have achieved in making financial services acce... more The success that microfinance institutions (MFIs) have achieved in making financial services accessible to the poor has spawned initiatives to expand them. Policy responses range from establishing special regulatory niches, adjusting existing regulatory structures, or controlling heretofore unregulated MFI activities. This article is based on a review undertaken of microfinance regulation in Benin, Ghana and Tanzania and identifies key issues and lessons about how the overall regulatory framework affects the ability of different types of microfinance institutions to become more integrated with the financial system. Laws to regulate activities other than the intermediation of public deposits into loans can result in disproportionately restrictive and unmanageable standards, even as dynamic microfinance sectors have emerged without conducive regulatory regimes. It is important to differentiate when prudential supervision is warranted and when non-prudential regulatory oversight will suffice, as well as to clearly identify the agencies to carry out the regulatory tasks.
Individual savings collectors play an important role in mobilizing savings from households and mi... more Individual savings collectors play an important role in mobilizing savings from households and microentrepreneurs and to have substantial potential for financial intermediation in some African countries. Savers are willing to pay for the convenience and security of collectors coming to their work places and accumulating their daily savings over a month, or sometimes longer periods. Collectors sometimes provide advances, but their lending capacity is severely limited by their lack of assets and of access to credit. This informal system is evolving through linkages to the formal banking system that enable savings collectors to intermediate as well as mobilize savings and through application of their methods by semi-formal institutions. LES COLLECTEURS D'EPARGNE ET ^INTERMEDIATION FINANCIERE AU GHANA
The Economy of Ghana: Sixty Years after Independence, 2017
This chapter examines the structure of non-agricultural employment in Ghana over the last 60 year... more This chapter examines the structure of non-agricultural employment in Ghana over the last 60 years through the lenses of different models of enterprise development and informality. Ghana's post-Independence development strategy emphasized capital-intensive state-owned and import-substitution industries, which were not competitive and dynamic enough to sustain growth, let alone absorb the fast-growing, urbanizing labor supply. Increasing regulation and distortion of the economy in the 1970s fostered informalization of many economic activities. Despite liberalization in the late 1980s, employment in informal micro, small and medium enterprises (MSMEs) grew in concert with the overall economy. While formal wage employment (public and private) has recovered since 2006, informal enterprises provide more wage jobs, and informal selfemployment has surpassed agriculture in absorbing labour.
The World Bank’s ‘Comparative Review of Microfinance Regulatory Framework Issues’ concludes that ... more The World Bank’s ‘Comparative Review of Microfinance Regulatory Framework Issues’ concludes that ‘recognizing different tiers of both regulated and unregulated institutions in a financial structure facilitates financial deepening and outreach’, yet warns that ‘legislation intended to promote microfinance may impose untenable supervisory burdens, while an excessively restrictive approach may constrict innovation and expansion’ (Gallardo et al., 2005, p. iii). Ghana represents a regulatory framework that has evolved to permit several tiers of both regulated and unregulated institutions engaged in microfinance, sometimes facilitating new institutional forms and sometimes responding to evolution of the market. Indeed, Ghana has been an innovator since the introduction of the first African credit union in 1955 and the first rural bank in 1976. It offers a contrast to countries that have only in the last decade created regulated tiers suitable for microfinance (for example, Uganda, Kenya), sometimes severely restricting their form (West African Monetary Union, Ethiopia), or that leave regulation to apex bodies (Bangladesh, Philippines; Meagher, 2002).
Regulating microfinance is an art of balance between protecting depositors and enabling financial... more Regulating microfinance is an art of balance between protecting depositors and enabling financial inclusion. Experimentation with microfinance in the late 20th century fostered innovative approaches to financial inclusion of low-income populations around the world. Ghana was a pioneer in regulations that enabled microfinance in some types of licensed institutions, while tolerating other forms. In the early 21st century, for-profit microfinance took off in ways not intended by early promoters. This review paper analyses the consequences of waiting too long to rein in proliferating profit-oriented microfinance companies and failing to build capacity for regulation, resulting in lost deposits, public mistrust, and a painful delicensing exercise. It also draws on some recent empirical research to indicate implications for public perception and key success factors, leading to a recommendation that regulation be accompanied by measures to build capacity for successful transformation and supervision of microfinance institutions for both financial inclusion and sustainability.
All rights reserved Manufactured in the United States of America First printing April 1995 Discus... more All rights reserved Manufactured in the United States of America First printing April 1995 Discussion Papers present results of country analysis or research that are circulated to encourage discussion and comment within the development community. To present these results with the least possible delay, the typescript of this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the autho-(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries.
BDS interventions that subsidize transactions are often thought to hinder market development by s... more BDS interventions that subsidize transactions are often thought to hinder market development by signalling that BDS can be obtained at an artificially low price. The justification for voucher programmes has been that MSEs are offered the chance to try out training at a temporarily reduced price, and if service providers respond to this opportunity, MSEs' lack of experience of the benefits of training is overcome, and they continue to purchase training at a higher level in future. This article discusses the economic rationale for intervention, then considers how to measure the short- and long-term development effects of incentives such as voucher and matching grant schemes. This is illustrated through an evaluation of the development impact of a recently ended voucher programme in Kenya, which shows signs of success in creating permanent market expansion in BDS training for MSEs.
Unemployment problems in urban areas of less developed countries throughout the world have stimul... more Unemployment problems in urban areas of less developed countries throughout the world have stimulated increasing interest in analyzing the impact of wages on labor supply and demand and in formulating appropriate wage policies. The urban-rural wage differential is a significant variable in attempts to measure the determinants of labor supply through migration from rural areas (Beals et al., 1967; Greenwood, 1969; Knight, 1972; Rourke and Sakyi-Gyinae, 1972). The level and growth of wages relative to capital costs may influence the labor intensity of investment and production through substitution, and hence affect the rate of growth of employment (Fajama, 1973; Frank, 1971; Harris and Todaro, 1969; House, 1973; Maitha, 1973; Roemer, 1971, forthcoming; Senga, 1973). Increasing attention is being paid to inequalities and changes in the distribution of wages and income (Ewusi, 1971; House, 1975; McCabe, 1974) and to the trade-off between unemployment and wage or price inflation (Ajayi and Osayimwese, 1974). Many of these studies stress the importance for employment growth of wage restraint relative to the price of capital and relative to productivity and product price increases over time. Hence it is essential for governments under pressure both from unions and from unemployment to have an accurate measure of the level and growth of the appropriate wage when trying to make wage policy decisions.
Findings reports on ongoing operational, economic and sector work carried out by the World Bank a... more Findings reports on ongoing operational, economic and sector work carried out by the World Bank and its member governments in the Africa Region. It is published periodically by the Africa Technical Department on behalf of the Region. Small Enterprise Responses to Liberalization in Five African Countries Micro and small-scale enterprises (MSEs) can contribute to private-led growth in Sub-Saharan Africa through employment and income-earning opportunities and by quick response to changing policies, incentives and market conditions. This study, Small Enterprises Adjusting to Liberalization in Five African Countries, analyzes sample survey data from Ghana, Malawi, Mali, Senegal, and Tanzania about five years after they launched structural adjustment programs (SAPs). The data reveal that many MSEs were able to take advantage of the changed environment, while others were constrained by increased competition, financial difficulties, inputs, and the business environment. The surveys focused on established manufacturing activities, excluding self-employment and commerce. Responses to Adjustment The sample countries undertook significant macroeconomic reforms and liberalization of markets during the late 1980s, although initial conditions and subsequent performance differed. The reforms were more extensive in Ghana and Mali, less so in Tanzania and Senegal. Relative prices changed substantially in Ghana, Tanzania and Malawi under major exchange rate devaluations. Basic macroeconomic indicators improved in all these economies in the post-adjustment period compared to the years preceding SAPs. Ghana showed the largest turnaround, while Senegal's economic performance remained relatively weak. The positive effects of more market-oriented policies on MSEs include: * Access to inputs: The removal or reduction of import licensing in all sample countries gave MSEs greater access to imported inputs than previous licensing systems, which were biased toward large, influential companies. * Relative prices: Devaluations squeezed producers who relied mainly on imported inputs (a high
Documents de synthèse de la Banque mondiale Série du département technique Afrique Ajustement des... more Documents de synthèse de la Banque mondiale Série du département technique Afrique Ajustement des petites entreprises à la libéralisation de l'économie dans cinq pays d'Afrique
BDS interventions that subsidize transactions are often thought to hinder market development by s... more BDS interventions that subsidize transactions are often thought to hinder market development by signalling an artificially low price. The justification for voucher programmes has been that they overcome the information gap by offering MSEs the chance to try out training at a temporarily reduced price. If service providers respond to this opportunity, MSEs' lack of experience of the benefits of training is overcome, and they continue to purchase training at a higher level in future. This article discusses the economic rationale for intervention, then considers how to measure the short-and long-term development effects of incentives such as voucher and matching grant schemes. This is illustrated through an evaluation of the development impact of a recently ended voucher programme in Kenya, which shows signs of success in creating permanent market expansion in BDS training for MSEs.
It has been argued recently that implementing a laissez-faire approach to economic development fa... more It has been argued recently that implementing a laissez-faire approach to economic development faces serious difficulties in Africa.1 This article provides some empirical evidence on the question by comparing the recent efforts of two countries to move towards less interventionist policies. Both Zambia and Ghana attempted to reverse their deteriorating economic performance by introducing major reform measures during the mid-1980s. Their different experiences illustrate both the positive effects that laissez-faire policies can have when resource allocation has been constrained by extensive controls, and the difficulties of sustaining and financing a reform programme.
Economic Development and Cultural Change, Oct 1, 1981
The hypothesis that female employment opportunities in agriculture and traditional small-scale pr... more The hypothesis that female employment opportunities in agriculture and traditional small-scale production are diminished in the early stages of industrialization is refuted in the case of Ghana where female labor force participation has risen despite rapid industrialization. This paper analyzes the impact of industrialization on small-scale production and the predominance of women in such production. Female labor force participation increased from 57% to 64% in the 1960s while male participation declined from 89% to 84%. However sectoral analysis of employment patterns reveals that womens employment gains were restricted to the traditional sectors. The modern sector provided only 6% of new female employment compared with 61% of new employment for males. On the other hand agriculture absorbed 46% of the increased female employment but only 10% of increased male employment. Small-scale manufacturing accounted for 26% of the total employment increase in the 1960s. Female participation in these industries rose from 60-70% in 1962-70 whereas it fell from 23-18% in non-small-scale industries. These results suggest that modernization is needed biased against female employment; however there is no support in the case of Ghana for the hypothesis that modernization occurs at the expense of cottage industry. To utilize the resource of female labor power and to incorporate women into the development process policies need to be oriented toward generating demand for small-scale production and avoiding subsidization of competing large-scale firms.
The success that microfinance institutions (MFIs) have achieved in making financial services acce... more The success that microfinance institutions (MFIs) have achieved in making financial services accessible to the poor has spawned initiatives to expand them. Policy responses range from establishing special regulatory niches, adjusting existing regulatory structures, or controlling heretofore unregulated MFI activities. This article is based on a review undertaken of microfinance regulation in Benin, Ghana and Tanzania and identifies key issues and lessons about how the overall regulatory framework affects the ability of different types of microfinance institutions to become more integrated with the financial system. Laws to regulate activities other than the intermediation of public deposits into loans can result in disproportionately restrictive and unmanageable standards, even as dynamic microfinance sectors have emerged without conducive regulatory regimes. It is important to differentiate when prudential supervision is warranted and when non-prudential regulatory oversight will suffice, as well as to clearly identify the agencies to carry out the regulatory tasks.
Individual savings collectors play an important role in mobilizing savings from households and mi... more Individual savings collectors play an important role in mobilizing savings from households and microentrepreneurs and to have substantial potential for financial intermediation in some African countries. Savers are willing to pay for the convenience and security of collectors coming to their work places and accumulating their daily savings over a month, or sometimes longer periods. Collectors sometimes provide advances, but their lending capacity is severely limited by their lack of assets and of access to credit. This informal system is evolving through linkages to the formal banking system that enable savings collectors to intermediate as well as mobilize savings and through application of their methods by semi-formal institutions. LES COLLECTEURS D'EPARGNE ET ^INTERMEDIATION FINANCIERE AU GHANA
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