According to authentic news sources such as mypublisher24.com, myjoyonline.com, GhanaWeb, etc., the list of multinational firms exiting the Ghanaian business environment recently has created panic amongst financial and business analysts, employers, and employees.
To make matters worse, many analysts have predicted this trend to continue if the Ghanaian business environment continues to be unfavourable and hostile to these international businesses. Multinational businesses such as Glovo, Jumia Foods, Nivea, Lipton Tea (Unilever), Dark and Lovely, and many more have already exited the Ghanaian market. The latest firm to exit the Ghanaian market is SocieteGenerale. The hostile Ghanaian business environment has also affected the firms’ cost-to-income ratio hence, the retreat from the market.
Several reasons have been given for this economic misfortune for Ghana; they included economic reasons, political instability, legal and regulatory issues, market saturation or lack of growth opportunities, social or environmental concerns, Competitor pressure, Supply chain disruptions, and so on. However, one fundamental reason that stands out is the hostile economic environment such as the depreciation of the cedi and the high cost of operations for these multinational firms in the country. Depreciation of the cedi has negatively affected profitability in the market.
The closure of multinational firms can have devastating Economic and social impacts such as job losses and a decline in community development projects, loss of skills and expertise, and a decrease in access to social programs and initiatives supported by the company. The closure of a multinational company’s operations in Ghana can lead to a decrease in government revenue since their operations demand them to pay taxes and fees to the government, which will impact public services and infrastructure development. Last but not least, the closure of a multinational company’s operations can disrupt the local supply chain, impacting suppliers, distributors, and other businesses that rely on the company for business opportunities.
The government (Ministry of Trade and Industry and Ministry of Finance) can use the principles of Islamic finance to mitigate the rate at which these multinational firms are exiting the Ghanaian business environment. First of all, it can develop a comprehensive legal framework to Implement Shariah-compliant regulations and laws to create a conducive environment for Islamic finance transactions in Ghana. This will attract multinational firms seeking to operate in the country and also enable those already in the country to stay.
Secondly, Islamic finance can assist conventional multinational firms in Ghana by providing them with alternative financing options that align with Islamic principles, such as profit-sharing arrangements, leasing agreements, and Islamic bonds (sukuk). This can help them diversify their sources of funding and potentially access new sources of capital.
Thirdly, Islamic finance can also provide risk-sharing mechanisms that can help multinational firms mitigate the financial risks associated with operating in Ghana, such as currency exchange risks and political risks. For example, Islamic finance principles advocate for the sharing of risks and profits between parties, which can help multinational firms better manage their exposure to various risks in the Ghanaian business environment to enable them to stay.
Moreover, asset-backed transactions which are unique to only Islamic banking and finance principles can immediately mitigate the woeful inflation that has plunged the Ghanaian cedi into misery and perhaps bring the cedi back to business by considerably increasing its purchasing power.
In a nutshell, by developing a comprehensive legal framework to Implement Shariah-compliant regulations and laws in Ghana, Islamic finance can provide multinational firms in Ghana with unique financing solutions, risk-sharing mechanisms, and access to new market opportunities, which can help them stay competitive and improve their cost-to-income ratio to enable them to navigate the challenges of the Ghanaian business environment. And Allah knows best! “Praise be to Allah in Whose favour good deeds are accomplished” (ibn Majah 3803).
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana and beyond.
Email: yahaya0246873726@gmail.com
https://www.facebook.om/Yahaya.iliasu.94
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