Many Ghanaians keep their money with one institution or another without fully understanding what type of institution it is. The sign outside may say “bank,” but the entity may actually be a savings and loans company. The difference matters. It affects what services are offered, how the institution is regulated, what protections apply to depositors, and what risks you may be taking.
The confusion is understandable. Savings and loans companies often look like banks. They have branches, take deposits, give loans, and advertise similar products. But there are important legal and practical differences.
This article explains the difference between a bank and a savings and loans company in Ghana. It covers what each type of institution can and cannot do, how they are regulated, what happens when they fail, and how to decide where to put your money.
Quick Facts
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Banks and savings and loans companies are both licensed by the Bank of Ghana, but they operate under different legal frameworks and have different permitted activities.
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Banks are regulated primarily under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
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Savings and loans companies are classified as specialised deposit-taking institutions, not full banks.
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Banks can offer a wider range of services, including current accounts, foreign exchange transactions, and trade finance.
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Savings and loans companies typically focus on retail deposits and lending, often serving individuals and small businesses.
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Both types of institutions are covered by the Deposit Protection Scheme, up to the applicable limit.
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The minimum capital requirements for banks are higher than those for savings and loans companies.
What a Bank Is
A bank is a financial institution licensed to accept deposits from the public, make loans, and provide a broad range of financial services. Banks are the most highly capitalised and most tightly supervised financial institutions in Ghana.
The legal framework for banks is set out in the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). This Act consolidated and updated the laws governing banks and other deposit-taking institutions.
Under Ghanaian law, a bank may:
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Accept deposits, including current, savings, and fixed deposits
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Make loans and advances
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Provide payment and settlement services
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Issue and process cheques
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Deal in foreign exchange
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Provide trade finance, including letters of credit
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Issue guarantees and other instruments
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Offer electronic banking services
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Provide investment advice in some cases
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Participate in the payment system
Banks are the core of Ghana’s financial system. They connect savers and borrowers, process payments, and support trade and investment. Because of their central role, they are subject to the highest level of supervision.
What a Savings and Loans Company Is
A savings and loans company is a type of specialised deposit-taking institution. It is licensed by the Bank of Ghana to take deposits and make loans, but its activities are more limited than those of a bank.
Savings and loans companies evolved from an earlier category of institutions sometimes called non-bank financial institutions. They were intended to serve individuals and small businesses, often in areas or market segments that banks did not adequately reach.
A savings and loans company may:
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Accept savings and fixed deposits
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Make loans and advances
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Offer some payment services
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Provide certain electronic banking products
However, a savings and loans company generally cannot offer the full range of services that a bank can. The specific restrictions vary depending on the terms of its licence and the regulations issued by the Bank of Ghana.
The Key Differences
Range of Services
The most important difference is the range of services. A bank can offer a full suite of financial products: current accounts, cheques, foreign exchange, trade finance, treasury services, and more. A savings and loans company has a narrower mandate.
This does not mean savings and loans companies are inferior. They serve a different purpose. Many focus on personal savings, small business lending, and microfinance. For a customer who mainly needs a place to save and access to loans, a savings and loans company may be perfectly adequate.
Capital Requirements
Banks are required to hold much more capital than savings and loans companies. The minimum capital requirement is the amount of money the institution’s owners must put up as a cushion against losses.
The Bank of Ghana has raised minimum capital requirements over the years. Banks are required to hold hundreds of millions of cedis in capital. Savings and loans companies are required to hold less, reflecting their smaller scale and narrower activities.
Capital is important because it absorbs losses. A well-capitalised institution can survive bad loans and economic shocks. A thinly capitalised institution is more vulnerable.
Regulatory Treatment
Both banks and savings and loans companies are supervised by the Bank of Ghana, but the intensity and detail of supervision differ. Banks are subject to stricter requirements on capital, liquidity, governance, risk management, and reporting. Savings and loans companies face similar types of rules but generally at a lower threshold.
Payment System Access
Banks are full participants in the payment system. They can process cheques, participate directly in the clearing system, and offer the full range of payment services. Savings and loans companies have more limited access and may need to operate through partner banks for certain transactions.
Foreign Exchange
Banks are licensed to deal in foreign exchange and to hold foreign currency accounts. Savings and loans companies generally do not have the same authority. If you need to hold dollars or transact in foreign currency, a bank is usually the appropriate choice.
Trade Finance
Banks can issue letters of credit, provide import and export financing, and offer other trade finance products. Savings and loans companies typically do not offer these services. Businesses engaged in international trade rely on banks.
What They Have in Common
Despite their differences, banks and savings and loans companies share several features.
Both are licensed by the Bank of Ghana. Both accept deposits from the public. Both make loans. Both are subject to prudential regulation, including rules on capital adequacy, liquidity, and governance. Both are covered by the Deposit Protection Scheme, meaning depositors are protected up to the specified limit if the institution fails.
Both are also subject to the same basic expectations: they must operate honestly, manage risk prudently, and treat customers fairly.
The History of Savings and Loans in Ghana
Savings and loans companies emerged to fill a gap in the financial system. Traditional banks focused on larger customers — companies, government institutions, and salaried workers. Many ordinary Ghanaians, especially in smaller towns and informal occupations, had limited access to banking services.
Savings and loans companies, along with rural banks and microfinance institutions, were intended to serve these underserved segments. They offered simple savings products and small loans with less stringent requirements than banks.
Over time, some savings and loans companies grew and began to resemble banks. This created regulatory concerns, because some were taking risks that their capital and management capacity could not support. The financial sector cleanup of the late 2010s revealed significant weaknesses in parts of the savings and loans sector.
The Financial Sector Cleanup
The cleanup of Ghana’s financial sector, which took place mainly between 2017 and 2020, affected both banks and savings and loans companies. The Bank of Ghana revoked licences, facilitated mergers, and restructured institutions that were insolvent or poorly governed.
Some savings and loans companies were closed. Others were merged or acquired. The cleanup was painful: depositors faced uncertainty, employees lost jobs, and the government spent significant public funds to resolve failed institutions.
The cleanup also led to reforms. The regulatory framework was strengthened. Minimum capital requirements were raised. Supervision was intensified. The goal was to prevent the kind of reckless lending and weak governance that had caused the failures.
Today, the savings and loans sector is smaller but, in principle, more stable. Institutions that survived the cleanup are subject to closer oversight and higher standards.
How to Tell the Difference
It is not always obvious whether an institution is a bank or a savings and loans company. The signage may be similar, and the staff may use similar language. Here are practical ways to tell.
Check the Licence
Licensed financial institutions are required to display their licence or state their status clearly. The Bank of Ghana also publishes a list of licensed banks and a separate list of licensed savings and loans companies. You can check the Bank of Ghana’s website or contact its offices.
Ask Directly
If you are unsure, ask the staff. A licensed institution should be able to tell you clearly what type of institution it is and what its licence permits.
Look at the Products
If the institution offers current accounts, foreign currency accounts, or trade finance, it is almost certainly a bank. If it focuses mainly on savings and loans, it may be a savings and loans company.
Verify the Name
The legal name of the institution often includes a clue. A bank will typically have “Bank” in its name, such as “XYZ Bank Limited.” A savings and loans company may have “Savings and Loans” in its name. However, this is not always reliable, so check the licence.
What the Choice Means for You
For Depositors
The choice between a bank and a savings and loans company depends on your needs. If you need a full range of services — current account, foreign exchange, international transfers — a bank is the appropriate choice. If you mainly need a place to save and access to small loans, a savings and loans company may serve you well.
The deposit protection limit applies to both types of institutions, so the basic safety net is the same. However, the overall strength of the institution matters. A well-managed savings and loans company may be safer than a poorly managed bank. The label is not a substitute for due diligence.
For Borrowers
Savings and loans companies often focus on small loans to individuals and small businesses. They may be more flexible than banks in their lending criteria. However, their interest rates may be higher, reflecting higher risk and higher costs.
Banks may offer lower rates for large, collateralised loans, but their requirements may be stricter. The choice depends on the size of the loan, the collateral available, and the borrower’s profile.
For Businesses
Businesses that need trade finance, foreign exchange, or complex payment services should use banks. Businesses that mainly need working capital and have a simple banking relationship may find savings and loans companies adequate.
Common Misconceptions
“A savings and loans company is the same as a bank”
They are different types of institutions with different licences, different permitted activities, and different regulatory requirements. They look similar, but they are not the same.
“Savings and loans companies are not safe”
They are licensed and supervised by the Bank of Ghana and covered by the Deposit Protection Scheme. The safety of any institution depends on its management and financial health, not just its type.
“Banks never fail”
Banks can and do fail. Several banks failed in Ghana’s financial sector cleanup. The type of institution is not a guarantee of safety.
“All financial institutions are covered by deposit protection”
Only licensed banks and specialised deposit-taking institutions are covered, and only up to a specified limit. Unlicensed operators are not covered.
“The Bank of Ghana operates savings and loans companies”
No. The Bank of Ghana regulates them. It does not own or operate them. They are private institutions.
Frequently Asked Questions
How do I know if an institution is a bank or a savings and loans company?
Check the Bank of Ghana’s published list of licensed institutions, ask the institution directly, or look at the types of products it offers.
Can a savings and loans company give me a cheque book?
Generally, no. Cheque accounts are a service provided by banks. Savings and loans companies do not typically offer cheque facilities.
Can I hold a foreign currency account with a savings and loans company?
Foreign currency accounts are generally offered by banks, not savings and loans companies. Check with the specific institution.
Are savings and loans companies covered by the Deposit Protection Scheme?
Yes, licensed savings and loans companies are covered, subject to the same deposit protection limit as banks. Check the current limit from the Deposit Protection Corporation.
Which is better for a small business?
It depends on the business’s needs. A small business that needs a simple savings account and small loans may be well served by a savings and loans company. A business that needs trade finance, foreign exchange, or large loans should use a bank.
Can a savings and loans company become a bank?
In principle, yes, but it would need to meet the higher capital and regulatory requirements for a banking licence. The Bank of Ghana would need to grant the new licence.
What happens if my savings and loans company fails?
If the institution is licensed and covered by the Deposit Protection Scheme, you will be compensated up to the protected limit. Amounts above the limit may be at risk and depend on the resolution process.
What to Remember
The difference between a bank and a savings and loans company is not cosmetic. It affects what the institution can do, how it is supervised, and what protections apply. Banks are full-service financial institutions with the highest capital and regulatory requirements. Savings and loans companies are more limited but serve an important role in reaching individuals and small businesses.
For most ordinary savers, the practical question is not “bank or savings and loans?” but “is this institution safe, well-managed, and suited to my needs?” A savings and loans company that is well run may serve you better than a bank that is not. But you should know what you are dealing with.
Before you deposit your money, ask the simple question: what type of institution is this? The answer matters more than you might think.
Source: The Accra Daily Mail
Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of The Accra Daily Mail, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.
