THE EFFECTIVENESS AND SUITABILITY OF IT/IS INVESTMENT IN SUPPORTING BUSINESS STRATEGY PURSUED IN REVIEWING THE CAUSE OF THE COLLAPSE OF BANKS LIKE UNIBANK

ABSTRACT

With direction leading to a consolidating Banks in Ghana, the global Banking industry is making significant efforts to advance knowledge about the effectiveness and suitability of IT/IS investment in supporting business strategy, this has led to a great significant growth in the banking sector. All organisation exist for a purpose and survival is the most common to all organisations. Changes to the internal and the external environment requires the organisation to changes its activities to suit the changing environment. Ignoring this often threatens the purpose of its existence. One of the causes for change in the direction is the recognising the performance gap. The effect on efficiency, quality, and gaps in service utilization provider payment methods not well studied and understood by most banks in Africa as less resources are invested into this sector. The current Banking Sector in Ghana is losing the trust of the people at an alarming rate and the decision of the Government in trying to mop up banks that are not performing has been welcomed and rejected by some people. Investing in IT/IS by banks has led to significant growth of the industry over the years and has helped improved upon the quality of services, quick withdrawal and fast deposited payment. The study shows that BANKS that invest in IT/IS are more profitable than Banks that rely more on manual work

CHAPTERONE

1.1  Introduction and background

UGL’s vision is to be the leading and preferred bank focused on SMEs and personal banking markets. During the year, the bank added 5 new branches to its network however its total deposits dipped by 4% from GHS2.7 billion in 2015 to GHS2.6 billion. The bank appears to place reliance on the interbank market to meet its liquidity needs as its interbank borrowings increased from GHS0.5 billion in 2015 to GHS2 billion at the end of 2016

A bank is a financial institution licensed to receive money and make loans. They also provide financial services, like as wealth management, currency exchange and safe deposit boxes. There are two types of banks, commercial banks/retail banks and investment banks. Certain countries, banks are regulated by the national government or central banks. Commercial Banks are concerned with managing withdrawals and receiving deposits.

While many banks have both a brick-and-mortar and online presence, some banks have only an online presence. Online-only banks have fast transfer of money and also larger interest rate and low fees deduction per transaction

1.2 Problem statement

The main purpose of banks seems not to be fully utilized in Ghana, that is much less work has been done on the impacts on service utilization and financial protection of supply-side reforms, including reforms to provide payment systems.  Yet provider payment, as an important element of strategic purchasing, is highly pertinent to the ultimate goal which is safely securing people deposit, and providing liquidity whereby anyone can make a withdrawal whenever they want after making a deposit and that families do not suffer undue financial hardship as a result of a bank failing. Many people living in the rural districts are making deposit into banks that are not licenced under the law and they mostly end up losing their deposit. The bank of Ghana has failed the people in this aspect by allowing such banks to keep on running and taking deposit in our rural areas and some even in urban areas. This shows a great oversight in overlaps of regulation that such financial institutions have hidden in plain sights under the law and are operating illegally in the country. The minimum capital requirement been enforced by the government has greatly affected most of the banks that where operating illegally and without licence. This truly was well done and the government deserve praise for this but the saddest part of the matter is people who lost their jobs when these banks where consolidated to form a Consolidated bank of Ghana. 

1.3 Objectives of the study

The general objective is to assess the cause of the collapse and failure of Unibank in meeting the minimum requirement specified by the Bank of Ghana which caused it to be absorbed into the Consolidated Bank of Ghana.

1. To examine the cause of Unibank failure in meeting the minimum requirement.

2. To assess the role of IS/IT in the day to day administration of the bank.

3. To examine how IS/IT internal and external management network could have help prevent Unibank collapse.

4. The cause and effect of Unibank failure on the economy of the country

1.4 Research Questions

Given data limitations, this study does not intend to provide a comprehensive evaluation of the collapse of Unibank. It focuses on answering the following three questions:

1. What is the cause of Unibank collapse?

2. What role did IT/IS have in the internal & external management of Unibank?

3. What is the level of clients’ satisfaction with respect to service provision by the service providers?

4. Why where they not able to meet the minimum requirement?

5. Who is to be blamed for their failure?

1.5 Scope / limitation of the study

The main limitations of this study are constraints of resources, access, and time.

     The researcher has had to face financial difficulties to conduct the study.

     There is also the problem of a limited time frame to complete the work.

     Data collection has become a problem since the bank is no longer in business and is in the consolidation process.

1.6 Organization of the Study

The study is structured into 4 chapters:

Chapter one: is the introductory chapter that covers the Research context and introduction to the study, Problem statement, Purpose, Research questions, Significance, Limitations, organization and chapter summary.

Chapter two: deals with review of relevant literature. Gives Brief review of the study

 Chapter three: is the Methodology section. It focuses on the research designs, data sources: population, sample size and sampling technique, research instruments and data collection. Chapter four: presents the analysis and discussion of the results of the study.

 Chapter five: presents a brief summary of the study and the main findings, conclusions with regard to the new knowledge derived from the research and recommendations for improving it. 

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter is concerned with the review of the study background on the research topic area. This deals precisely with reviewing the existing literature on the collapse of banks. The regulation on the banking sector has become stricter over the years. The collapse of major banks across the world, often as a direct or indirect result of polices and regulation protecting customers deposit was not as strict as it is now. The cause of the many collapse of banks across Ghana is due to the failure of our regulatory bodies regulating this sector and oversight on many issues that arises over time. This situation has given rise to banks which are not registered under the law and as a result they take customers deposited and run away. The move by government on this matter has two faces, one can say is really commendable to make such a move to filter out the banking sector but the way this was done has affect almost every major bank and financial institutions across Ghana. This and many more. 

2.2 Roles of banks in the economy:

Banks perform various roles in the economy. The eliminate information problems between investors and borrowers by checking the latter and ensuring that correct use of the depositors’ funds. They also provide temporary smoothing of risk that cannot be given at a point in time as well as insurance to depositors against unexpected shocks. The maturity mismatch between assets and liabilities within banks are subject to the possibility of systemic risk. Banks are great contribute to the growth of the economy, basically in Ghana the financial employee a large percentage of the youth compared with other businesses. It performs merit role in corporate governance.

2.3 The Central Bank:

Central banks are responsible for currency stability, controlling inflation and monetary policy such as interest rates and overseeing money supply.  Here in Ghana the central bank is the Bank of Ghana, who has the responsibility to regulate the activities of all the banks scattered across the country.

2.4 Investment Banks 

Investment Banks focus on providing corporate clients with services such as underwriting and assisting with merger and acquisition (M&A) activity.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

The previous chapters provided the introductory and contextual matter of the study and reviewed prior relevant literature, thus placing the study in its right perspective.

This chapter covers the research methodology of the study, how the research was done, the problem that arises from our investigation, and the background of the study area, method and technique that were used in gathering data for the analysing the study within chapter four.

3.1 Revoked of Unibank License:

The Bank of Ghana revoked the banking licenses of Unibank and has appointed a Receiver over their assets and liabilities. Deposits and selected assets and liabilities of the bank have been acquired and assumed by a new bank – Consolidated Bank Ghana Limited. All deposits of the bank are safe and have been transferred to the Consolidated Bank. Customers were told to carry out their business as usual at the banks which will now become branches of Consolidated Bank. All staff of these bank will become staff of Consolidated Bank. Boards of Directors and shareholders of these banks no longer have any roles. Unibank and other banks like Royal bank and Beige Bank were deeply insolvent, meaning that their liabilities exceeded their assets, putting them in a position not to be able to meet their obligation as and when they fell due. Construction Bank and Sovereign Bank obtained their banking licenses by false pretences through the use of suspicious and non-existent capital, which has result in a situation where their reported capital is inaccessible to them for their operations. To protect depositors and other customers and the financial system as a whole, the Bank of Ghana revoked their licenses.

3.2 Role of IS/IT in the Administration of Unibank before the collapse:

IT is changing the way businesses operate and deliver products to consumers in many sectors. We have alarms that detect poisonous substances in our air, medical equipment that can identify life-threatening conditions before they become an issue, or smarter computer software to make controlling vital equipment easier than ever before an industry that has seen huge innovations in recent years is the use of technology within the banking world. IS/IT plays a major role the maintaining an organization internal and external day to day activities, in the case of Unibank the implementation of IS/IT strategy in their business was at intermediary level. The level of relationship between the bank and its customers through the use of IT was not encouraging, customers whom should have been receiving content email services on monthly bases were denied such services. IT in the banking sector has had a major impact on

 3.2.1 Customer service

Financial Tech is disrupting the finance and banking sector is through customer service. From historical data a great customer service team is vital for all company involved in the banking sector. Anything that has to do with handling of money or financial matters needed trained staff to be able to solve problems and aid people. However, in the case of Unibank their customer service was not satisfactory therefore prevented many people from joining the bank. If the customer base of the Bank was very large there would have been no denying that they would have been able to provide the minimum capital specified by the Bank of Ghana.

3.2.2 Online banking

The online banking with Unibank was really not lacking that much in terms of customer service, internal transfer of funds and many others but in the field of creating an account via online, management of funds and access to funds was really lacking in performance and quality

CHAPTER FOUR

RESULT AND DISCUSSION

4.0 Introduction

This chapter reveals the outcome of the study through data collected. Various analytical tools were used in gathering data to bring into view what has been happening across the banking sector with Unibank included in the findings.

4.1 Total Operating assets (Millions of Ghana Cedis) of Unibank in comprises with some few major banks

BANK

2016

2015

2014

2013

2012

2011

Change

Growth %

1

Ghana Commecial Bank

5,686

4,327

4,000

3,217

2,833

2,361

1,359

31%

2

Unibank

5,528

3,650

1,970

1,191

818

505

1,878

51%

3

STANBIC

4,974

3,984

3,270

2,819

1,679

1,117

990

25%

UGL recorded the highest increase in operating assets in the industry from GHS3.6billion in 2015 to GHS5.5billion in 2016 representing a 51% increase over the period. From this data we can clearly speak that Unibank recorded the highest form of growth over the past few years. So, the fact that they were not able to provide the minimum capital is clearly due to mismanagement of funds or one can say political influence has led to it collapse.

4.2 QUARTILE-RETURN ON EQUITY

 FIRST QUARTILE-RETURN ON EQUITY

With the exception of BBGL and SCB, all the first quartile banks recorded a decline in return on equity, mainly driven by the worsening economic challenges and the impact of non-performing loans on the banks. Fidelity and Unibank’s reduced profits had an adverse impact on shareholder returns. Returns on equity for the first quartile banks averaged 23.6% during the year which is worse than 25.2% in the prior year.

SECOND QUARTILE-RETURN ON EQUITY

BBGL’s measures to reduce and control costs seem to have yielded results because it decreased its costs income ratio from 43% in 2015 to 40%

CHAPTER 5

5.2 Summary of Findings

From our findings at chapter four we can justify that Unibank out this all the other banks in terms of growth of the company over the years and also per the statement we received from the Bank of Ghana the number of liabilities of the bank compared with the number of the assets exceed the number of assets the have acquired over the period. Even though Unibank out did most the banks, his debt liability was to large for it to continue its operation therefore causing it to be added to the consolidated bank of Ghana.

5.3 Recommendation

I recommend base on the facts above that any financial institution must always weigh its assets and liability before thinking of acquiring more liability on their part and that all financial institutions must always try to meet the minimum require for them to operate before venturing in to doing business.

5.4 Conclusion

I conclude that the decision by the Bank of Ghana to add Unibank to some of the selected bank chosen to be part of the Consolidated Bank of Ghana was in the favour of Ghanaians. To help protect their deposit and investment made within Unibank

5.5 References

Investopedia

Google.com

Information-age.com/technology-finance-banking-sector-123471800

Pwc.com/gh/en/assets/pdf/2017-banking-survey-report.pdf