Journal of Accounting and Taxation Assignment

Introduction

This introducing chapter will provide the reader with an insight into the research area. The main focus of this study is the use of the balanced scorecard framework to assess performance of banks in several dimensions and measures.

Baground

The background to the study is given in the following sections which look at introducing the balanced scorecard, the banking sector in Ghana and the motivation for this work.

Introducing Bsc

After questioning contemporary management accounting in several articles during the 1980s, Kaplan & Norton (1992) introduced the Balanced Scorecard (BSC) concept. However, already in 1979, Parker suggested a balanced view on firms’ operations comprising financial measures and measures related to marketing strategy, research and development, social responsibility and employees.
Despite Parker’s early contribution, the 1992 article by Kaplan & Norton appears to have been more timely and may be recognized as setting into motion the scorecard approach, i.e. the starting point to “put the BSC to work” (Kaplan & Norton, 1993).
According to Roslender (1997), the BSC could serve as an illustration to contemporary ‘best practise’ pursuits in accounting for strategic positioning, i.e. to support managerial attempts to achieve and sustain a strategic position in the market place.
The BSC intends to reflect the necessity of balance between the traditional financial perspective and the three non-financial elements of customers, internal business processes and innovation/improvement. BSC translates an organisation’s mission and strategy into a comprehensive set of performance measures to provide the necessary framework for a strategic measurement and management system (Kaplan & Norton, 1996). The BSC enables companies to track short-term financial results while simultaneously monitoring their progress in developing the capabilities and acquiring the intangible assets that generate growth for future financial performance.
According to Kaplan & Norton, an effective strategic learning process requires a shared strategic framework that communicates the strategy and allows all participants to see how their individual activities contribute to achieving the overall strategy. The BSC provides a representation of the organisations’ shared vision. The use of measurements as a language helps translate complex and frequently nebulous concepts into a more “precise” form that promotes consensus among senior executives. The BSC communicates a holistic model that links individual efforts and accomplishments to business unit objectives.
The scorecard should incorporate the complex set of cause-and-effect relationships among outcome measures and the performance drivers that describe the trajectory of the strategy of those outcomes. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit so that they can be managed and validated.

The Banking Sector In Ghana

Ghana is a relatively small country within the West African sub-region with a population of about 20 million people. The economy of Ghana can be described predominantly as a developing economy with several sectors of which the banking sector plays a critical role in the development of the economy.

The banking sector in Ghana has seen tremendous growth and development from the colonial era through to independence in 1957 to date.
Banks were established, inter alia, to mobilize financial resources from savers and make these resources available to borrowers for investment. In general, the evolution of the banking system in Ghana may be seen as a response to certain perceived credit needs of some sectors in the economy at different point in time (Gockel, 1995).
Banking emerged in the colonial era with the aim of providing banking services for the British trading enterprises and the British colonial administration. The British Bank of British West Africa, which later became known as Standard Chartered Bank, was established in 1896 followed by Barclays Bank DCO, now Barclays Bank Ghana Limited (BBG) in 1917. In spite of their objectives of providing banking and currency services to expatriate companies and the colonial administration, the bank attracted the patronage of some indigenous Africans.
Banking emerged in the colonial era with the aim of providing banking services for the British trading enterprises and the British colonial administration. The British Bank of British West Africa, which later became known as Standard Chartered Bank, was established in 1896 followed by Barclays Bank DCO, now Barclays Bank Ghana Limited (BBG) in 1917. In spite of their objectives of providing banking and currency services to expatriate companies and the colonial administration, the bank attracted the patronage of some indigenous Africans.
Various banks emerged at various times to cater for specific needs of the developmental stage of the economy. For the purpose of financing the purchases of cocoa, the co-operative bank was established in 1935 by the farmers’ co-operatives and the colonial government.
To cater for medium and long-term financing needs of the manufacturing and agro-business sectors, the National Investment Bank (NIB) was therefore established in 1963 to provide long-term credit facilities. In 1965, the Agricultural Credit and Co-operative Bank now Agricultural Development Bank (ADB) was established to provide finance for the development of the agriculture sector. The Bank for Housing and Construction (BHC) was also established by government decree in 1972 to undertake mortgage financing activities, facilitate the participation of domestic or foreign private capital in the construction sector and enter into joint venture projects in this sector. The Social Security Bank (SSB) now SG-SSB Bank limited was established in 1977 to allow salaried workers to acquire consumer goods. It was also tasked with the operation of development finance scheme for small-scale industrial and agriculture projects.
Merchant banks emerged to accept deposits and open checking accounts for only corporate bodies. They also open accounts for individuals trading under business names with high net worth and with relatively substantial turnovers as well as for individuals (non-traders) who have big deposits or whose incomes are substantial; the functional distinction among the banks is contiguous. Furthermore, they are also responsible for the operation of offshore, export and import business. As financiers to merchants’ merchandise, they were to be responsible for providing such subsidiary function such as administration of letters of credit, guarantees on behalf of their customers, etc. The individual banks in the merchant banking business in Ghana were the Merchant Bank of Ghana Ltd., Ecobank Ghana Ltd., CAL Merchant Bank Ltd. and First Atlantic Bank Merchant Bank.
Despite the creation of specialized banks to cater for various credit needs, it became evident that rural and other informal sector credit needs could not be met. It thus became desirable for the establishment of specialized banks to provide credit to the rural sectors.