The central bank has issued a provisional banking licence to Union Savings and Loans, thus paving the way for the financial institution to operate as a universal bank.

A central bank source told the B&FT that: “It was (licence) issued at the end of last year. So they (Union S&L) have the approval to proceed as a universal bank.”

There are currently 29 universal banks operating in the country with total assets of GH¢57.2billion as at September 2015, while total paid up capital stood at GH¢2.72billion as at March 2015. The addition of Union Savings and Loans will bring the number of universal banks in the country to 30.

According to the Bank of Ghana’s Guidelines for Class 1 banking licence, the central bank may issue provisional approval to the applicant on such terms and conditions as it may consider necessary and appropriate.

Union, by the issuance of the provisional licence, has satisfied initial requirements of operating a banking business with integrity and prudence, and meets the required initial paid-up capital as well as required professional competence.

Union Savings and Loans however needs to meet the GH¢120million minimum stated capital to operate as a universal bank -- a huge leap from the GH¢15million needed to operate as a savings and loans company.

But Union Savings and Loans believes it is ready to take the huge step from a savings and loans company to becoming a universal bank. The company started a massive rebranding and restructuring agenda to become the banking institution of choice by 2017.

Nana Otuo Acheampong, a banking analyst, welcomed Union Savings and Loans to the banking industry. “They are welcome to the club. They have done well to move from savings and loans to a universal bank, the big boys club,” he said.

He urged them to aim higher and become a bigger institution by considering an acquisition or merger with some of the existing savings and loans companies. “As their name suggest, they can form a union with another two or three of the existing ones to become big.”

He noted that the challenge facing the banking industry at the moment is size. He said most of the banks in the country are not big enough to undertake big-ticket transactions.

In addition to the commercial banks, there are about 35 savings and loans companies and over 300 microfinance intuitions in the country, providing financial services to just under 30 percent of the 26.5 million population that is within the formal banking sector.

With a minimum paid up capital of GH¢120million per universal bank, banking analysts have said the banks are not large enough to undertake big-ticket transactions, and that consolidation is needed to create banks with the financial strength to accelerate the economy growth.

Mr. Acheampong called for more mergers and acquisitions so that Ghana can boast bigger institutions to support growth in the economy. “If we have five huge banks it is better than so many small and medium size banks as we have now. The main challenge is size,” he said.

Despite Union Savings and Loans well-documented support given to the SME sector, Nana Otuo Acheampong noted that some of the universal banks already play in the SME space -- hence Union must get creative.

“Union has achieved a lot in supporting the SME sector as a savings and loans outfit. If they want to stay SME even as a universal bank, it will be adding to the number already there because some of the universal banks are championing SME banking; so Union Savings and Loans might end up doing nothing exceptional from what is available. A source at the central bank confirmed that approval had been given late last year to the fast-growing savings and loans company.