An Approach to creating a Viable Banking Sector in Liberia

Harry Ar-toe Gkornean BSc, MBA, MSc, CCMS |

The Author

One major constant in the history of the global economy is that nations do experience economic recessions. For over 5 years the Liberian economy has been in a recession that has adversely impacted living standards across the country. The causes of the downturn are cleared: lower price and global demand for primary commodities, the Ebola epidemic, UNMIL Drawdown, lowering foreign direct investment, loosened fiscal & monetary stance, mismanagement, etc.

What is unclear and currently being debated rests with the appropriate set of changes to Liberia’s fiscal and monetary programs in response to the economic nosedive. Noteworthily, these troubling economic conditions were inherited by the current administration, whose responsibility is to shift the economy’s trajectory upwards.

So far, the administration is implementing programs leading to a shallower and shorter recession. As highlighted in recent International Monetary Fund (IMF) report on Liberia, some of the “major milestones” undertaking by the current administration include reforms in revenue generation, sales of central bank bills, standing deposit and credit facilities in the interbank market. These measures will weightily contribute to modernizing the monetary policy framework.

Fiscal and monetary policymakers have consistently echoed the lack of credibility and trust in the financial services industry in Liberia. One of the difficulties in effectively regulating the money in circulation and the exchange rate regime, as agreed by experts and policymakers, is the inefficiency of the traditional financial structure and regulatory framework. Substantial financial and economic activities are conducted outside the formal financial market and monitoring mechanism.

Relationships are being established and nurtured between government and relevant stakeholders in the money market (both formal and informal), including foreign exchange traders, encouraging the circulation of both currencies — Liberian Dollars & U.S. Dollars — within the formal transactional banking environment.

While this relationship is relevant, a more evidence-based and long-term sustainable approach must be pursued, endeavoring to build credibility in the formal banking sector. With trust, convenience and reliability in the formal banking system, customers will seek to utilize the system for their benefits, thereby ensuring appropriate and manageable control of currencies in circulation by regulators and other actors.

This article lays out a set of process and service changes to Liberia’s traditional banking structure, serving as sustainable intermediate policy response, to increasing Liberians level of credibility in the formal banking system. To achieve this end, a collaborative approach that seeks to ensure organizational and cultural change in Liberia’s financial services industry must be pursued. Regulatory framework supervised by the Central Bank of Liberia, and includes the Ministries of Finance & Development Planning, Commerce & Industries, Liberia Telecommunication Corporation, and private actors in the technology and/or telecommunication industries. This framework will exert to achieve the following fundamentals:

Significantly Increase non-cash transactions in the economy

Increase online and automated banking services

Provide value-added and customer-driven solutions

Efficient customer relationship management


Significantly increase Non-Cash Transactions in the Economy

Recent developments across the banking sector have shown that the exchange of goods and services can be made possible, and more efficiently, through non-cash transactions. With the advent of e-commerce, Point-Of-Sales (POS) transactions and Automated Teller Machine (ATM) services using bank cards (VISA, MASTERCARD, etc.), the gap in economic activities between the informal and formal financial sectors are increasingly narrowing.

An increase in non-cash economic activities plays a significant role in reducing commerce related risk and vulnerability. It also increases the ability of consumers including the poor to timely access basic financial and social services. This will eventually have direct impact on standard of living and poverty reduction.

Commercial banks in Liberia must begin to ensure that all customers are provided with banks cards and other payment tools that commit them to making deposits readily accessible: 24 hours a day and 7 days a week. This is possible through the development of a unified payment and settlement infrastructure including automated clearing house (ACH) and an electronic payment system that facilitates the routing and settlement of point-of-sale and ATM services, automatic bills payment transactions and interbank transfers.

The development of an effective national payment infrastructure, led by the Central Bank of Liberia in collaboration with commercial banks and technology companies, will efficiently facilitate non-cash transactions and serve as incentives for expanding participation in the formal financial sector.


Increase Online and Automated Banking Services

The physical infrastructure deficit in Liberia along with other structural impediments make it extremely difficult for customers to transact with banking institutions. To address this difficulty, commercial banks across the country, by directive of the central bank, must ensure that a significant amount of services are provided through an effective online and automated banking system. Most services for which customers would normally visit the physical banking locations should also be provided through an automated telephone system, virtual customer servicing or through a responsive and secured online portal.

In addition to the added reputation that comes with offering valuable services, the central banks must ensure that incentives are provided to commercial banks that provide effective and efficient online, virtual and automated banking services to customers. This should reduce the traffic, time and cost associated with visiting a banking location. While some traditional services may still require a visit to a banking location, most everyday services must be provided painlessly.


Provide Value-Added and Demand/Customer Driven Solutions

Central bank in collaboration with other relevant regulatory institutions must ensure that commercial banks provide products and services that add values to customers. Focus must be shifted from just providing financial products to providing services that enhance economic activities and make doing business easier, affordable, efficient.

For example, business customers that transact in a cash-handling environment must be afforded, in a reasonable and affordable manner, merchant services tools and Point-of-Sale (POS) infrastructure that motivate businesses to utilize the use of bank cards for payments.


Efficient customer relationship management

Innovative customer relationship management is crucial to the service industry especially financial services in ensuring that customized services are provided for customers. Banks must commit themselves to becoming customer-intimate, providing specialized focus to the management of customer relationship.

Very long queues at banks that keep customers waiting for hours don’t serve as incentives to widen the formal financial sector. Banks in Liberia must shift their attention from a transaction-centric to becoming customer-centric.

The Ministry of Commerce must work with stakeholders in the sector including educators to develop appropriate customer relationship management training as part of a professional development and capacity building programs. Customer-facing employees must be adequately trained to satisfactorily meet the needs and aspirations of customers.

For the service industry in general, credible institutions must be accredited to provide customer service certifications to customer-facing employees. Incentives and penalties must be enforced for businesses in or out of compliance. No person must work with customers directly or indirectly without a certified accreditation in customer relationship management or customer service management.


These recommendations provide a policy direction for the development of Liberia’s financial system. Financial sector development is a crucial building block for private sector development. Achieving these evidence-based fundamental triggers will require an effective change management initiative across the banking sector. The current course of the banking sector will be altered as reliability and ease of doing banking increase. A solution is only good when it’s implemented. Therefore, a comprehensive change management framework that focuses on building awareness, desire, knowledge, ability and reinforcement for these radical and sustainably benefiting impact in the banking sector must be implemented.

There are evidences of a positive relationship between financial services expansion and poverty reduction. Through the formal banking system, ordinary Liberians can pullout accrued savings or utilize less risky credit opportunities to invest in income-generating assets. Adequate access to valuable financial services will eventually generate employment, increase incomes and lift Liberians out of poverty. Historically, Liberians without appropriate access to formal financial services are restricted to rely on a very narrow range of oftentimes risky and expensive services in the informal sector.

According to the International Monetary Fund (IMF), depositors in African countries grew by five-fold between 2004 to 2013. (2014 Financial Access Surveys) Amid these improvements, there remain a significant gap amongst the banked and unbanked African adults. A 2015 study of the role of Africa’s informal financial services found the following:

That only 23% of African adults had an account at a formal financial institution.

That about 500 million African adults don’t participate in the formal banking system.

That only 15% of adults in Africa have a debit card, and there are 5 ATMs per 100,000 persons in sub-Sahara Africa.

These datasets might even be worse for Liberia considering our technological, institutional and infrastructural challenges. Hence, the urgency to ensure financial services development in Liberia. Widening the formal financial services industry will entail addressing the underlying structural imperatives such as the financial sector infrastructure and products or financial solutions. It will be critically required to ensure the removal of existing physical, bureaucratic and financial barriers in the industry. This process will serve as a genuine initial step in creating a viable formal banking sector in Liberia.

About the Author:

Harry Ar-toe Gkornean is an accomplished management, leadership and strategy professional, a certified change management specialist and a business development consultant. His cross-functional professional expertise spans over a decade in the public, private and international development sectors with experience working in both developed and underdeveloped countries in Africa and North America. Harry research interests focus on building high performance and change effective organizations in developing economies. He is particularly focused on strategy design, change and performance management, and the use of analytics for evidence-based leadership and management.

Harry holds a Bachelor of Science degree in Economics from the University of Liberia, an MBA in Global Management from Thunderbird School of Global Management at the Arizona State University and a Master of Science in Organizational Leadership from Grand Canyon University, USA.

He can be reached at email: cell: +1-267-679-4760 Facebook: Harry Ar-toe Gkornean Instagram: gkornean LinkedIn: Harry Ar-toe Gkornean

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