Pest Ananlysis of Non Babking Sector

Topics: Monetary policy, Fractional-reserve banking, Money Pages: 5 (1325 words) Published: March 16, 2011

Enterpreneureural ambitions are easily killed when a business idea is implemented without considering factors that can militate against growth. Most companies fold up before their fifth birthday. These companies with great potential should have grown if certain technical indicators were assessed and the right panacea given.

PEST analysis is the analysis of the external macro-environmental factors that affect all businesses. Such factors are usually beyond the firms control and sometimes present themselves as threat. It is an acronym for Political, environmental, social and technological.

However, changes in such factor also present new opportunities. Many of these factors are industry specific and there is the need to perform the analysis on various industries to obtain an accurate picture.

This analysis is conducted using Express savings as a case study. ESLC is a non banking financial institution offering micro-financial services to SMEs.


As a savings and loans Company, government through the Bank of Ghana, regulates its activities. The following are some of the political factors that could cause the company’s actual result to differ materially from its expected result.

Change in laws and regulations. This includes changes in the reserve requirements of the banks, taxation requirement. There are potential fines imposed on financial institutions who are not able to meet the bank of Ghana reserve requirement. Suctions include force closure, etc.

Changes in the non-banking business environment including, pricing pressure from the review of the treasury bill rates. This directly or indirectly puts pressure on the company to review it lending rates as well. Bank of Ghana also reviews lending rates of financial institution every quarterly. As the company has not reduced its rates after the Monetary Policy Committee (MPC) of Bank of Ghana has met, it has made it less competitive in its industry. With the government offering lending capital through MASLOC, and other venture capital companies at low cost, Express as well as other savings and loans are struggling to make profit. What is more worrying is the request by BOG to increase the minimum capital requirement of savings and loans from Gh 7 million to Gh 10 million by June , 2011 which is a major challenge to the survival of ESLC.


The past years has seen strong growth in the economy. However things have changed. This was due to the recent recession that hit the world in general. This led to fluctuations in general pricing of goods and services, hence, inflation and recession. During the recessionary period, demand for goods and services were virtually low leading low demand for credit facility, hence lower interest rates.

The company also runs a money transfer and term deposit account (TDA).Due to the influx of many financial institutions and telecommunication companies in that area of the industry; the clientele base has reduced, having an impact on the profit margin of the firm. With the issue of TDA, fall in the treasury bills rate makes it a disincentive for potential investors to bring their monies for investment. With the increase in price of stationery and other variable assets as well as overheads including salaries, cost of doing business has gone high.


Many Ghanaians have moved from the habit of spending to that of savings. The system whereby companies pay their staff through the bank has improved the culture of banking in the country.

As a savings and loans company, its social target is the micro and small scale businesses. To meet the needs of these social groups, the company runs a susu product for such clients who fear to enter a banking premise or who may not have the time to leave their business to a banking hall. The susu product helps...
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