Flash Report /
Ghana

Ghana Mobile Money: Minimum capital requirement raised

    Nkemdilim Nwadialor
    Nkemdilim Nwadialor

    Equity Research Analyst, Financials

    Tellimer Research
    16 September 2019
    Published by

    The Bank of Ghana (BoG) has released further guidelines for Payment System Providers, in which the minimum capital requirement for all mobile money operators in Ghana has been raised to GHS20mn (cUS$3.6mn) from GHS5mn (cUS$0.9mn) previously. According to the BoG notice, the new threshold becomes effective within nine months. As a recap of existing guidelines, mobile money operators which engage in other activities (e.g. telcos and banks) are required to set up subsidiaries through which mobile money services will be offered exclusively, and all mobile money companies must have a 30% holding by local shareholders.

    Ghana is Africa’s fastest-growing mobile money market, as we highlighted in a recent report – the value of mobile money transactions rose at an 85% CAGR between 2015-18 and currently account for 20% of all non-cash transactions in Ghana. We consider the new regulation on capital to be a positive development, as it should improve the ability of mobile money operators to drive financial inclusion and also protect deposits/savings of mobile money users (who are largely low-income earners).

    Mobile money in Ghana is currently dominated by Telcos (especially MTN Ghana with a 90% share of transactions), with banks as secondary contenders (c2% market share). We do not expect either of these groups to face any challenges in complying with the new capital requirement – MTN Ghana had a cash balance of GHS275mn and our covered banks averaged cGHS2.0bn as at H1 19. Smaller players such as fintechs might find it more difficult, but overall are unlikely to significantly impact the outlook for mobile money in Ghana.  

    MTN Ghana has the highest exposure to mobile money, with mobile money transactions amounting for cGHS231mn (cUS$43mn) in revenues, or 20% of its topline. MTN trades at 10.7x consensus 2019f PE, a 38% discount to mobile money telecom peers.

    The top banks in the digital space are Ecobank and Standard Chartered, which like other non-indigenous banks, have developed strong digital banking franchises. Both banks are leveraging technology to gather cheap retail deposits and can achieve notably lower cost of funds than peers within our coverage (2-3% in FY 18 vs 5-8% for GCB and CAL). CAL is investing heavily in its digital finance infrastructure and we expect it to become a strong contender in the medium term. More broadly, our pick is GCB due to its strong balance sheet position and potential to reprice its expensive deposits.