Tuesday, November 28, 2006

Banking,Growth,Expansion and impact on Sierra Leone Economy

Going by the words of the Governor of the Central Bank Dr. J.D. Rogers that Sierra Leone as a nation can now boast of reserves, which he pegged down between the ranges of $170bn to $200bn. What the governor failed to analyse economically and for the benefit of the ordinary consumer is whether the reserve he has been boastful about is in terms of capital asset of financial.
Therefore the question continues to linger as to what the reserve is all about. The financial reserve of any nation is something that cannot be relied upon because of its quality to depreciate with the passing of time.
While capital could be sent to appreciate and attract economic benefit, Governor J.D. Rogers could have done further to resolve the dilemma, failing which he has left the people groping, finding reasonable answers to the pronouncement of the central bank boss.
Rightly, the establishment of financial institutions such as the commercial banks, discount houses and home equities can contribute significantly and economically to the economy of any state.
The question one would wish to ask is what are the impacts, in the positive sense that the commercial banks have created for the development of the economy of Sierra Leone? Firstly, one would wish to comment on the growth of the commercial banks in the country after the war. Since the conclusion of the war to date, there have been strings of commercial banks in the country. This growth has significantly contributed to empower the nation’s economy.
With a total of about seven established commercial banks with more in the pipe line gives the impression of an economic hope. But economists would argue that banking alone cannot improve the economy especially in a country where the economic activities are either saturated or limited.
This could be an indisputable fact especially when the banks rely heavily on the economy and the activities provided that could generate income for customers to inculcate the culture of savings.
Candidly, it is through savings that the commercial banks can generate funds through the payment of fees. In addition commercial banks sell out securities to the public such as treasury bearer bonds, and equally so issue out soft loans with minimal payment.
Despite the string of commercial banks in the country interest payments on loans have been considered uneconomical and irrational and has discourage a reasonable percentage of the population to frown at these facilities.
Besides, the purchasing power of the working class has always remained a very contentions issue to the point that most people have refused to utilize the banks.
Additionally, the commercial banks have made no provision, even if there are any could be seen as minimal, the funding of developmental project which could have been a source of employment in the country and such would stimulate savings habit.
With this number of commercial bank in the country, account holders could be estimated at less than 180,000.
Figures researched shows that about 160,000 accounts are being operated in the banks by various customers. Whether or not these accounts are active is yet to be proven. This account for the minimal impact the banks make in the economy.
The level of unemployment is a major problem that has contributed in no little way to radically improve the economy.
It would be recalled that in the last meeting held in Nigeria by major economic stakeholders the issue of trade, debt cancellation and aid were discussed and the counties singled out for economic considerations are Ghana, Sierra Leone and Senegal. It became startlingly clear at the meeting that sub-Saharan Africa is one of the poorest regions in the world and produces only 1% of the world gross domestic product, despite being home to about 10% of its population.
Sierra Leone has suffered severely from the global economic slow down as many foreign investments are either scared or not available to boast the economic aspirations of the country. For the economy to boom and the banks contribute, foreign investment is desperately needed to develop infrastructure, telecommunications and exploit natural resources such as diamonds, gold and other resources that could be harnessed in order to develop the economy.
Since 1997, the talk about debt cancellation has been part of the economic discussion by world leaders. Chancellor Gordon Brown had pressed fellow finance ministers to write-off debts that had crippled poor nations.
With the debt cancellation would Sierra Leone emerge from her economic predicament? The response to this question could be an issue of wait and see, especially when corruption in the country continues to gain tremendous height.
Perhaps this could be one reason why the banks cannot take up funding of projects in the country for fear that investment into the sector would be a catastrophe.
As of now there is not much to be reconciled about the significant input of the banks in the development of the economy except the pronouncement of the Central Bank Governor that Sierra Leone can boast of a reserve.