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MONEY AND BANKING

Trade by barter (direct exchange of goods andservices for goods and services.

Problems:

Double coincidence of wants Unit of exchange

Indivisibility of commodities

Burden carrying goods for exchange

Problem of lending

Problem of saving

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MONEY

Money is anything that is generally accepted as a

medium of exchange anything that will be

accepted by virtually everyone in exchange for

goods and services.

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Characteristics of Money

1. It should be readily and generally accepted

2. It must be portable to transport

3. It must be durable

4. It must be scarce

5. It must be divisible into smaller units to allow for smaller transaction

6. It must be homogeneous

7. It must not be readily counterfeited else it would

loose its value8. It must be recognisable

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Modern forms of Money

Coins

Paper money or Bank notes

Bank Deposits

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MONEY

Functions of Money

1. Medium of Exchange

2. Unit of Account

3. Store of Value

4. Means of deferred payment

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IMPORTANCE OF MONEY

1. Money gives maximum

satisfaction to people for work

done2. It enables people to defer

payments for goods and services

that cannot be paid for today.3. It encourages division of labour

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Importance of Money

4. It make it possible to assess,

determine and place value goods

and services5. It has improved the standard of

living

6. It has made it easier forindividuals and organisations to

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BANKING

A bank may be defined simply as the

process of accepting deposits and giving

out loans including monetary advisory

services to customers.

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TYPES OF BANKS

1. The Central Bank

2. Commercial Bank

3. Development Bank4. Rural Bank

5. Other Financial Institutions

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COMMERCIAL BANKS

Types in Ghana (examples)

1. Ghana Commercial Bank

2. Barclays Bank Ghana

3. Standard Chartered Bank

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DEVELOPMENT BANKS

Examples

1. National Investment Bank

2. Agricultural Development Bank

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RURAL BANKS

Examples in Ghana

Antwiwa Rural Bank

Mansoman Rural Bank

Upper Manya krobo Rural Bank

Lower Pra Rural Bank

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OTHER FINANCIAL INSTITUTIONS

Examples in Ghana The insurance companies

The Credit societies

Money lenders

Building societies

Discount houses

Stock exchange

Forex bureau

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THE CENTRAL BANK

Functions of the Central Bank

1. A bank to the government

2. Banker to the commercial banks

3. Issues notes and coins4. Controls and regulates the money supply

5. Lender of last resort

6. Responsible for setting up development banks andrural banks

7. Supervises and regulates activities of financialinstitutions

8. Licences all financial institutions in the country

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CENTRAL BANK

How it controls the Credit

Open Market Operations (OMO)

Bank Rate Reserve Requirements/Cash Ratio

Selective Credit Control/Directives

Special Deposits

Direct Order

Moral Suasion

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COMMERCIAL BANKS (JOINT

STOC

K BANKS)Functions1. They accept deposits.

2. They act as agents for their customers makingpayments on their behalf.

3. Valuable properties such as gold ornaments andjewellery and kente are kept with them for safekeeping.

4. They give advice to prospective investors as towhich sector of the economy to invest in.

5. They undertake investment by granting loans,overdrafts, discounting bills or buying shares inbusiness enterprise.

6. Transact business on behalf of their customers.

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NATIONAL INVESTMENT BANK

Functions1. To provide and advice on sound business

management skills to local entrepreneursand potential entrepreneurs.

2. To provide business capital to existing andpotential investors.

3. To identify investment opportunities topotential investors and to undertake joint

business ventures.4. Generally, it was established to promote and

strengthen the productive capacity of all thesectors of the country.

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AGRICULTURAL DEVELOPMENT

BANKFunctions1. Provide credit facilities to the agricultural

sector of the economy.

2. Conduct research into agriculture in general3. To invest in processing and the distribution

of agriculture produce

4. To mobilise human and financial resourcesto develop the agricultural sector.

5. It provides normal banking functions to thecitizens.

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TYPES OF ACCOUNTS

Current Account

Savings Account (savings deposit)

Fixed Deposit (time depositaccount)

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Fixed Deposit

Features of Fixed Deposit

I. The customer's deposit serves as a security for aloan from the bank

2. The customer must be present at the bank forwithdrawals

3. The customer uses credit form to deposit money

4. The customer uses debit forms to withdraw money

5. The bank does not charge any commission on the

services rendered to the fixed deposit accountholder.

6. The fixed deposit account holder interest on hisdeposit.

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