How money works: Understanding money in the Ghanaian context

It’s more than paper notes and coins

Money is key in every financial system and is used to pay for investments, debt, taxes, commodities, goods, services, buildings among others. Governments of countries normally issue and control money based on economic stability.

In Ghana, money works in a broad spectrum which covers how government controls money, how companies make their money, how financial markets work, how individuals can maximize their income (money) and minimize expenditure through investments, financial systems, bonds, stocks, banking system, financial technology, and mobile banking applications, managing debt, cryptocurrencies, managing debt, avoiding online financial fraud, crowd and SME funding, bitcoin among others.

However, we cannot understand how money works in isolation without having to understand its uses. The three main uses of money are as a medium of exchange, storage, and valuation according to William Cowey. Let us discuss these various forms through which money manifest, to be able to add meaning to our economic well-being.

How the government controls money

The government controls money through its monetary policy. In Ghana, the government issues treasury bills and bonds with maturity 30 to 365 days. This is also done by buying and selling governments securities through what we call open market operations. This, in turn, affects the economy both at the micro and macro level. At the micro-level, a large supply of money will increase capital accumulation and spending power where individuals can access money from financial institutions with low-interest rates. At the macro level, the amount of money in the economy directly affects GDP, unemployment, overall growth, Inflation, foreign exchange rates among others.

How companies make money

Companies all over the world operate mainly to make revenue (money). Companies within the different sectors whether manufacturing, technology, banking, real estate, hospitality, oil and gas, engineering, and/or education, among others aspire to be profitable.

Companies make the best use of their assets and resources which include personnel, technology, information, land, capital to make money which in turn is reinvested after all operational expenses and debtors and shareholders have been satisfied.

To make revenue companies design tailor-made products to be patronized by people with different needs and different age groups and also render services to them.

For Instance, MTN is the biggest telecommunication and mobile money company in Ghana. The company provides electronic communications, money transfer, savings and credit services for over 10 million subscribers and this gave them revenue (money) of over 3 billion Ghana Cedis in 2017 alone.

How financial markets work

This is another broad area where money manifests itself to complete transactions and serve as a medium to increase returns. The financial market is a broad topic which should be treated on its own, however, it forms a necessary component in determining how money works. The financial market is a term used to describe a market for the trading of money (stocks, currencies, derivatives, bonds). In a broader term this area is responsible for moving money from areas where there is a surplus to areas where there is a scarcity of its supply. Here people give money to companies to own a share of the business or as a loan to be paid back with interest. The financial market concerns itself with creating products and services to provide profits for people with excess money (Investors), making these funds available to those who need additional money (lenders).

How individuals can maximize their money through investments

People all over the world maximize their income through investing in stock, bonds, and other investment vehicles. The investor who has invested in bonds seeks to earn principal payments and principal upon maturity. On the other hand, the investor who has invested in Stock expects his or her money to work in two ways:

1. Price action which entails that the stock will rise in value

2. Dividend which entails yearly returns/money the company will pay for using the investors’ money.

Financial systems

These are the institutions such as the Banks, Insurance companies, stock exchanges, that create an avenue for the exchange of money. It could be also referred to as a set of regional, global and business-specific set of rules that facilitate the exchange of funds. It also involves practices that financial stakeholders (borrowers and lenders) use to decide which projects to finance, how to finance, who finances and terms of the finance.

Every financial system has components these components encompasses all aspects of finance, including accounting measures, how money is expended. At the regional level, money is stored and traded at Commercial banks, Stock Exchanges, and financial clearinghouses. Globally, we can talk about how money works through the International Monetary Fund, Central Banks, Government Treasuries, World Bank and International Banks.


Bond is another way money works in every economy. A bond represents a loan from an Investor to a borrower ( An agreement is made on the details of the loan and most at times its semiannual Interest payments and principal at maturity. This is a common way by which companies, governments, municipalities, states raise money to finance their projects.

There are different types of bonds available to borrowers and lenders which can mostly trade on a debt/bond market. Bonds are generally referred to as fixed Income Securities and are mostly traded on a fixed income market or privately through an Over-the-counter between the lender and the Borrower. The money (coupon Payments) the lender gains is the return for loaning their money to the issuer.


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