**2.1 Financial market structure and challenges in Ghana**

The financial market of Ghana is a segment of the larger economy and plays an integral role in driving economic growth, development, and stability in the country. Ghana's economy is heavily reliant on external sources of capital, such as foreign aid and external borrowing, and thus the management of these funds and the functioning of the domestic financial market are of utmost importance. A thorough understanding of the structure and challenges of the financial market in Ghana is thus necessary to maintain a healthy and sustainable economy. The financial market of Ghana is composed of traditional financial intermediaries such as banks, non-banking financial institutions, microfinance institutions, insurers, and other non-banks. These institutions are regulated by the Bank of Ghana, the central bank of Ghana, to ensure the soundness, efficiency, and stability of the system. Furthermore, the Bank of Ghana plays an active role in the regulation of the capital and money markets of Ghana, as well as overseeing the activities of the non-bank financial intermediaries [10].

Despite the presence of the Bank of Ghana's regulatory role, various challenges hinder the effective functioning of the financial market in Ghana. These challenges can be categorized broadly into three main areas: deficient financial infrastructure, financial inclusion, and liquidity risks. Firstly, the structure of the financial market in Ghana suffers from limited infrastructure, which hinders the ability of the banks and other financial intermediaries to operate efficiently and effectively. The lack of efficient payment systems, poor access to financial technology, and inadequate capital markets infrastructure all impede the efficient flow of money and the allocation of credit. As a result, there is a lack of access to capital and resources, which can act as a major constraint on the growth of the market. Financial inclusion is also a major challenge in Ghana. Notably, the country has an extremely large unbanked population, with around 43% of the population estimated to be unbanked. This is due to various factors, such as access to capital, poverty, and a lack of basic financial literacy. To ensure that all citizens have access to the financial market, the government and the regulators encourager greater financial inclusion and that efforts must be made to educate the population about financial services and products.

Finally, liquidity risks are a major challenge for the Ghanaian financial market. The market is characterized by low liquidity and a lack of long-term resources, leading to a reliance on short-term money markets. This poses significant risks, as the market can be vulnerable to sudden changes in liquidity, which can cause rapid and significant downturns in the economy. The structure of Ghana's financial market is thus hampered by various challenges, which affect its ability to provide the efficient credit and capital allocation needed for economic growth and stability. To counter this, the government and the regulators must continue to work to improve the infrastructure of the financial system, promote financial inclusion and provide access to credit to all citizens, and promote long-term resources and enhanced liquidity. Ghana has experienced a turbulent economic landscape in recent years. Economic difficulties have been compounded by several factors, including rising global commodity prices, political uncertainty and an overvalued exchange rate. These issues have highlighted the need for Ghana to undertake a successful debt restructuring program. Furthermore, the banking sector in particular has suffered from a difficult operating environment and the need for reform processes has become increasingly apparent.

### **2.2 Financial market structure**

The financial market structure (FMS) in Ghana is characterized by a relatively large banking sector, comprising 31 banks, 3 non-bank financial institutions and 5 microfinance institutions (MFI's). Furthermore, the country is served by a nonbank financial system including savings and loans companies, merchant banks,

*Emerging Financial Markets in Ghana and Public Financial Management Crisis Uncertainties… DOI: http://dx.doi.org/10.5772/intechopen.111373*

and insurance and finance houses. The banking sector is governed by the Bank of Ghana (BOG), which is responsible for formulating and implementing monetary and banking regulations. The BOG also serves as the primary regulator and supervisor of the banking sector. The banking sector has experienced a period of consolidation in recent years, with the number of banks decreasing from 37 in 2001 to 31 in 2017. The decreasing number of banks has led to an increased concentration of banking assets in the larger financial institutions. There is also a trend of increasing ownership of banking assets within the banking sector, which could result in a lack of competition and higher prices for banking services [11].

The capital market in Ghana is relatively underdeveloped and is characterized by a low level of activity and limited access to finance from the capital markets. The number of listed companies on the Ghana Stock Exchange (GSE) is also low. As of July 2017, the GSE had a total of 43 listed companies, which is one of the lowest levels for a capital market in Sub-Saharan Africa.
