The Dean of the University of Ghana Business School (UGBS), Prof. Joshua Abor, has noted with concern that the country’s bond market is currently suffering from a lack of participation by institutional investors, which is adversely affecting development of the market.
He said macroeconomic instability has made many institutional investors risk-averse and uncomfortable to invest in the bond market; a situation he said contrasts with that in developed markets where big-ticket investors are happy to play in the bond market.
“There are challenges in our bond markets. We don’t have many institutional investors, but when looking at the developed markets you have individuals who understand the market and therefore will invest,” he said.
The comments come in the wake of recent public criticism that institutional investors, especially financial firms, are now taking less risk by investing in Treasury bills.
Speaking in Accra during his maiden book launch, ‘Financial Markets & Institutions: A Frontier Market Perspective’, Prof Abor indicated that all facets of the country’s capital market — from stocks, mortgages to the bond markets — are confronted with challenges which impede their development.
He explained: “The stock exchange is confronted with small-sized firms and has very few listings on the markets, which has created a situation of high illiquidity where if you hold stocks it is not that easy to offload or sell. These are some of the challenges that we need to understand as policymakers, students, and lecturers”.
The Dean of the UGBS stated that he was motivated to write the book due to challenges in the financial markets: “If you take our mortgage markets, borrowers don’t have collateral. What they have may be unregistered landed property, which they can’t use to borrow. But you hardly find any of these problems in developed markets.
“These are some of the issues that need serious addressing, and in order to do so you need to understand these issues from the domestic perspective.”
His book thus discusses the issues of financial markets and institutions from a frontier market perspective.
Some of the excerpts in the book highlight Ghana’s financial market, which it states can be categorised into money and capital markets. Though the money market seems very active, the capital market still holds great prospects for Ghana’s economic growth.
The book discusses the insurance and pensions industries — which are important to development of the capital market.
The Ghanaian insurance market is a thriving one, with huge potential for growth in both the life and non-life markets.
The new pension law also encourages private participation in the pensions industry, and this has the potential of promoting capital market development.
Development of the Ghana Stock Exchange, and now the Ghana Alternative Market, is very critical for overall expansion of the capital market; and this should increase access to long-term debt and equity funds for investment.
Source: B&FTonline