The Evolution of Banking in Sierra Leone

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  • Topic: Bank, Central bank, Sierra Leone
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  • Published : December 31, 2011
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INSTITUE OF PUBLIC ADMINSTRATION AND MANAGEMENT/
UNIVERSITY OF SIERRE LEONE

MODULE: FINANCIAL REGULATION AND PRACTICES

COURSE: BSC (HONS) FINANCIAL SERVICES (YEAR 4)

ASSIGNMENT: DISCUSS THE EVOLUTION OF BANKING IN SIERRA LEONE

NAME: MOHAMED KHALIL KOROMA
REG: 4606

NAME OF LECTURER: MR N’JAI

CONTENT
1. Introduction
2.1 Adam Smith and Modern Banking
2. Overview of Sierra Leone banking
3. Our Perception of Banking in Sierra Leone
4. Conclusion

INTRODUCTION
Mankind has always been seeking security and protection. This need has led him to scientific and tecological development on one hand and banking development on the other. In modern times the banking has become so necessary that if is excluded from any economic system like ours in Sierra Leone the whole business and economic world will collapse like house of cards. In this banking development the services of three groups of persons in the Sierra Leone economy cannot be ignored: 1. Money Lender

2. Merchants
3. Gold smiths
The Bank of Venice is perhaps the first ever regular bank in the banking history and was established in 1157 followed by these banks as under: Bank of Barcelona in 1401
Bank of Genoa (Italy) in 1407
Bank of Amsterdam in 1609
With the exception of the extremely wealthy, very few people buy their homes in all-cash transactions. Most of us in Sierra Leone need a mortgage, or some form of credit, to make such a large purchase. In fact, many people in advance countries use credit in the form of credit cards to pay for everyday items. The world especially our Sierra Leone economy as we know it wouldn't run smoothly without credit and banks to issue it. In this article we'll, explore the birth of these two now-flourishing industries. Adam Smith and Modern Banking

Banking was already well established in the British Empire when Adam Smith came along in 1776 with his "invisible hand" theory. Empowered by his views of a self-regulated economy, moneylenders and bankers managed to limit the state's involvement in the banking sector and the economy as a whole. This free market capitalism and competitive banking found fertile ground in the New World, where the United States of America was getting ready to emerge. In the beginning, Smith's ideas did not benefit the American banking industry. The average life for an American bank was five years, after which most bank notes from the defaulted banks became worthless. These state-chartered banks could, after all, only issue bank notes against gold and silver coins they had in reserve. A bank robbery meant a lot more before, than it does now, in the age of deposit insurance and the Federal Deposit Insurance Corporation - FDIC. Compounding these risks was the cyclical cash crunch in America.

Alexander Hamilton, the secretary of the Treasury, established a national bank that would accept member bank notes at par, thus floating banks through difficult times. This national bank, after a few stops, starts, cancellations and resurrections, created a uniform national currency and set up a system by which national banks backed their notes by purchasing Treasury securities, thus creating a liquid market. Through the imposition of taxes on the relatively lawless state banks, the national banks pushed out the competition.

The damage had been done already, however, as average Americans had already grown to distrust banks and bankers in general. This feeling would lead the state of Texas to actually outlaw bankers, law that stood until 1904.

OVERVIEW OF SIERRA LEONE BANKING
Sierra Leone gain her independence from England (uk), were Banking emerge from as it was founded in 1694 to act as the Government ‘s Banker and debt t –manager. Since then its role has developed and evolved , cantered on the management of its position at the centre of the UK ‘s financial systems and is a key figure in decision – making, financial regulations and how it...
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