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The World Bank and the International Finance Corporation (IFC) say Ghana has a strong opportunity to rejuvenate its capital markets—provided the recent gains in economic stability, including easing inflation and falling interest rates, continue.
Speaking at a World Bank seminar on Financing Firm Growth and the Role of Capital Markets, IFC Manager Cesaire A. Meh shared comparative data on capital market trends in Ghana, sub-Saharan Africa and Vietnam. His analysis underscored Ghana’s early successes, subsequent challenges, and the renewed potential for growth.
According to Meh, Ghana recorded a significant increase in capital market financing as a share of GDP in the early 2000s. This rise, he noted, was fuelled by strong economic performance, robust reforms and supportive market conditions that opened greater access for issuers. “During that time, the economy was doing well, reforms were strong, and you saw higher cumulative net issuance,” he said.
However, these gains later reversed as inflation spiked and macroeconomic conditions weakened. He contrasted this with Vietnam, a country that initially displayed similar trends but sustained its momentum and continued expanding its capital market financing. Meh noted that Ghana’s recent economic improvements may create an opportunity to rebuild market depth. “Inflation is getting lower; interest rates are getting lower. This means we could potentially replicate the earlier period of strong expansion, or even go higher, depending on how conditions evolve,” he said.
He further revealed that in Ghana—as in many low-income economies—the bulk of capital market financing is generated domestically rather than internationally. Between 2010 and 2022, about 71% of capital raised came from domestic issuances. South Africa showed a similar pattern, with over 60% of capital raised locally.
Another key trend, he observed, is the increasing presence of new issuers. By 2022, 61% of total capital market financing in low-income countries came from first-time issuers, compared to 42% in high-income countries. “These newer firms are younger, smaller and typically issue smaller amounts, but they are also more productive,” he said.
He added that these firms are often financially constrained, making access to capital markets essential to their growth and, by extension, to economic development. Meh stressed that the broader economic impact of capital market financing ultimately depends on how firms deploy the funds they raise. While some use financing inefficiently—such as for debt repayment or cash accumulation—data suggests that many firms in low-income countries channel funds into productive investments.
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This demonstrates the transformative potential of well-functioning capital markets to enhance firm growth, boost productivity and support overall economic expansion. He concluded that Ghana stands to benefit substantially if it strengthens access for younger, high-productivity firms and continues to build on its improving macroeconomic environment.