The Bank of Ghana (BoG), as part of an effort to roll out full operationalization of Non-Interest Banking and Finance (NIBF) in the country, is developing new liquidity management tools tailored to non-interest banking institutions, ensuring they can manage excess funds effectively.
As liquidity management is a key requirement in monetary policy management, but policy instruments like repos, open-market operations, and reserve requirements of banks are structured based on conventional interest bearing, that do not attract noninterest banks.
According to the central bank, liquidity management for non-interest institutions will be guided by asset-backed structures and risk-sharing models rather than conventional interest-based instruments, but will still meet the same prudential benchmarks. However, it explains that, if no non-interest liquidity management tools are available, non-interest banks may invest excess liquidity in conventional ones but will not take interest.
“Short term and long term Sukuks are liquidity management tools, and the Bank is working together with the Securities and Exchange Commission to develop their guidance in parallel to create liquidity tools attractive to non- interest banks” the Bank noted in a frequently asked questions note published on its website.
“Further, we have learnt of liquidity management tools deployed by other central banks, which we shall add to the portfolio of liquidity management instruments.”
Meanwhile, the central bank outlined some new liquidity management tools it will be implementing, such as:
A safe custody account which will allow participants to deposit excess funds in their possession for a period of 3 or 7 days; A non-interest note which shall entitle the participating institutions to subsequently obtain interest-free loans up to the amount they initially deposited with the central bank; Non-interest backed securities – The bank may invest in non-interest financial certificates issued by multilateral financial institutions normally in the form of sukuk structured on different products; and Lenders of last resort instruments for example, intraday facilities are being considered.
The BoG is working with the Securities and Exchange Commission to develop guidance on Sukuk, creating attractive liquidity tools for non-interest banks. Transparency and consumer protection are integral to the non-interest banking guidelines, with clear disclosures and independent reporting.
These developments aim to promote financial inclusion, broaden economic opportunities, and provide consumers with more choices while ensuring fairness and non-discrimination in the financial system.
By Adnan Adams Mohammed
