The AGI argues that if nothing is done about smaller finance institutions like savings and loans and microfinance companies, businesses at the micro level will suffer.
“At the micro and small-scale level there has been a lot of turbulence there: let’s not talk about Menzgold and the banks, but the savings and loans and the microfinances; a lot of people have their monies locked in there which they are not getting.
And it is all because of the panic situation that we find ourselves in: there has been a lot of turbulence. So, if we say that consolidation of banking sector is complete, I would say yes – but when it comes to the financial sector in general, I don’t think it is complete because there is a lot of work still to be done, especially in bringing back confidence to the system,” said AGI’s CEO, Seth Twum Akwaboah.
Mr. Twum said this when asked by the B&FT in Accra about the sort of support businesses expect from the banking sector this year, following conclusion of the recapitalisation exercise in December 2018.
He said because a chunk of Ghanaian businesses are SMEs, they rely heavily on savings and loans and other small finance companies to fund their growth and expansion; hence the urgent need to ‘clean-up’ that sector.
Since 2013, more than 50 microfinance institutions have collapsed due to poor managerial skills, while some have been used as conduits for the perpetration of fraud through Ponzi schemes that lure depositors with absurdly lucrative investment interest rates.
Typically, financial institutions – banks, finance houses, microfinance institutions, and others, mobilise savings from individuals, households, and institutions, and channel them as much-needed capital to those who need them for productive uses in the economy – individuals, households, businesses of all sizes, and other organisations.
However, due to the insolvency of seven universal banks in 2018 and the recent Menzgold and DKM saga, most financial experts are of the view that the financial sector – in its current state – is not capable of mobilising resources for development, unless the central bank together with its stakeholders do more to restore much-needed confidence to the sector.
Therefore, to be able to build a strong financial sector capable of funding the type of local industries government thirsts for, the AGI wants financial sector regulators to rid the sector of its many challenges.
This, Mr. Twum argued, will help bring self-assurance back to a sector he said is critical in pooling together resources for the country’s development.