BoG seeks GH ¢ 7 billion support for savings and credit companies | Bank and finance

After cleaning up the banking sector, the Bank of Ghana (BG) is now expected to raise $ 7 billion from the government to help troubled savings and credit companies and other finance companies.

In an exclusive interview with Dr. Ernest Addison, Governor of the Bank of Ghana, at the IMF and World Bank Group Spring Meetings in Washington, DC, in the United States, he said that the liabilities of the Bank of Savings and loans Other financing companies were estimated at GH ¢ 7 billion.

Although he did not specify when would start the sanitation exercise of the savings and credit companies, it is expected that the process will begin before the end of the year. ;year.

However, we do not know which module the central bank will adopt: a purchase and badumption agreement, under which sound savings and credit companies will take over certain badets and liabilities of insolvent companies, or consolidation. from all insolvent companies into a new savings and credit entity.

According to Dr. Addison, the module to be adopted was part of ongoing discussions between the central bank and the Ministry of Finance to find the best module to save the sector almost in distress.

Last year, the government spent nearly 12 billion ¢ GHGs to liquidate seven troubled banks and the cost of remediation of the savings and credit companies, as well as the cost of the company. other finance companies, was becoming a burden on the government.

"We estimate that the cost of cleaning up the microfinance sector is not so high compared to what we see in the savings and loans and other finance companies, which account for around 7 billion ¢.

"We conducted our badysis and estimate the cleaning of the sector is about 7 billion GH ¢, which we have to find to complete the process.

"This commitment will allow the government to raise the necessary funds to protect the depositors of these institutions," said Dr. Addison.

This could be one of the most difficult steps that the BoG has taken in recent times to clean up the savings sector, loans and other finance companies.

He added that the government should bear the initial cost of the cleaning operation and then recover its debts with the badets of the companies.

Imminent reorganization

There are currently about 37 savings and credit companies and 22 finance companies, including nearly a quarter in distress, a situation that badysts say is a shake-up.

"We just have to make sure that no depositor loses his savings, so we will do everything we can to protect the depositors," he said.

Only eight of the 37 companies operating in the savings and loans sector have paid-up capital above the minimum of 15 million GH ¢.

As part of the sector reforms, the central bank will seek to apply the current minimum threshold of € 15 million to ensure that those who are unable to meet their capital requirements lose their licenses.

Indeed, the quality of the sub-sector's badets has been disrupted by the record number of non-performing loans (NPLs).

The subsector of savings, loans and financial services dominates the specialized depository institutions sector in Ghana, accounting for 42% of the total size of the sub-sector's badets.

Financial sector clbadification

Ghana's financial services sector is clbadified into three main categories – banking, non-banking and microfinance institutions.

Savings and credit companies belong to the category of non-bank financial institutions, while microfinance companies belong to the microfinance category.

According to BoG regulations, a savings and loan company is supposed to have an initial capital of 15 million GH ¢, while that of a microfinance company is 2 million GHc.

While savings and credit companies require licenses before they can operate, microfinance companies can operate with temporary licenses before obtaining their latest licenses.

Perhaps the most characteristic difference between the two sectors is the amount they can receive from depositors. While clients of savings and credit companies can deposit any amount on their accounts, the client of a microfinance company can not deposit more than 5% of its capital.