The Development of Bond Market in Ghana: Issues and challenges

Abstract

This study investigates underlying structural conditions necessary for robust bond market development and to determine whether they exist in Ghana. It further examines the potential role a well developed bond market will play in Ghana‟s developmental effort. The question raised in this research is why do Sub Saharan African nations including Ghana still have underdeveloped bond market? In order to achieve objectives, two types of questionnaires were designed for administration. One for the listed and unlisted corporate entities, and the other for the market participants including banks, ministry of finance, Ghana Stock Exchange, research institutions, etc. Descriptive statistics has been mainly used to analyze data results. Pearson‟s correlation coefficient has also been utilized to ascertain the robustness of factors need for bond market development. The study found out that the necessary structural requirements for bonds market development, identified in the literature in other developed and emerging markets, are not readily available. These conditions includes; wide institutional investor base, improved corporate governance, macroeconomic stability, settlement issues, bankruptcy laws, debt securitization, strict regulatory and legal regimes, existence of bench mark yield, credit rating institutions, institutional and market centre, strong stock exchange. It is however recommended, based on study analysis and findings, that, any initiative to develop Ghana‟s bond market should emphasize on the following: Government and market operators must educate the public on the mechanisms of bonds as an investment vehicle. Government should pursue and sustain a stable macroeconomic environment with its attendant‟s low inflation and stable interest rate, develop government bond market to enable the creation of benchmark for corporate market, improve corporate governance, to strengthen the regulatory and the legal for bond market, and strengthen the banking sector of the economy.