Financial literacy of employees in managing financial crisis: A case study of indigenous banks in Ghana

International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue XII, December 2021 | ISSN 2454–6186

Financial literacy of employees in managing financial crisis: A case study of indigenous banks in Ghana

Kofi Owiredu-Ghorman
Department of Accountancy Sunyani Technical University, P. O. Box 206, Sunyani, Ghana

Abstract: It is believed that employees who are more financially literate tend to make more reasonable predictions about their company’s investment and work hard to save their companies from collapsing. The study aims to evaluate the effect of employee financial literacy on the financial crisis of indigenous banks in Ghana. The study used five big traditional banks in Ghana. The researcher used a quantitative research approach and a multiple case study method. Structured questionnaire was used to solicit information from the employees of the selected banks. It was found that there is a positive and significant correlation between financial literacy and financial crises. The possibility of better financial literacy will lead to a decline in financial crises in the banking sector, such that financial literacy explains a decline in financial crises. Furthermore, employees have high levels of the knowledge acquisition dimension of financial literacy but low levels in the application dimension It is recommended that managers of banks focus on financial literacy training that centers on the application dimension of financial literacy. Training should emphasize calculation skills for interest rates, inflation, time value of money, and the stock market. It is suggested that bank management use all available means to ensure that the adoption and implementation of financial literacy strategies for their employees is prioritized.

Keywords: Financial literacy; financial crisis, Ghana, banking sector

I. INTRODUCTION

In Ghana, financial crises are still fresh in the minds of most Ghanaians. The nation has been engulfed in a banking crisis with the closure of seven banks, a takeover of two banks by GCB Bank Ltd., and the consolidation of the others into a new one. Seven banks collapsed within one year, putting 2,700 jobs on the line and the government piling 7.9 billion cedis ($1.7 billion) on its debt to pay for the gap between the banks’ liabilities and assets (Bank of Ghana, 2018). Before the breakup of five other private local banks in August 2017, one of them, UniBank, took 3.1 billion cedis from the Central Bank from 2015 to June 2018 alone, of which some 1.6 billion cedis were uncollateralized, posing a risk to the central bank (Bank of Ghana, 2019). In addition to the weak capital adequacy levels, uniBank, Royal Bank, Sovereign Bank, Beige Bank Ltd., and Construction Bank Ghana Ltd. struggled to improve over time and were pronounced insolvent in August 2019 (Bank of Ghana, 2019).

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