Henry Kerali
A RECENT report released by the World Bank has estimated that
government will require about GH¢5.5 billion (equivalent to 1.6 per cent of gross
domestic product) to solve all challenges relating to microfinance institutions
(MFIs), savings and loans institutions (SLs) and finance houses (FHs).
It also recommended the introduction of another resolution bond for
the Consolidated Bank Ghana (CBG) to support the closure of two additional
banks which took place in January 2019.
The Fourth Ghana Economic Update indicated that some specialised
deposit-taking financial institutions (SDIs) were in violation of prudential
norms as most were financially distressed in terms of liquidity or solvency
challenges.
The World Bank has for that matter supported a resolution agenda for
SDIs which follows the implementation of action plans developed by the Bank of
Ghana (BoG).
The purpose of the agenda is to mitigate vulnerabilities through
phases of approaches that include
establishing Financial Sustainability Council and the Deposit Protection
Corporation that are to, among other things, assess the vulnerability of financial
systems on an ongoing basis.
The implementation of the agenda for SDIs started on May 31, 2019,
when the BoG revoked the licences of 347 microfinance companies and 39
micro-credit companies in the country.
Speaking at the launch of the report via video call, a Senior
Financial Sector Specialist (co-author), Carlos Vicente, said measures by the BoG
would strengthen resilience and stability of the financial system in the medium
term.
“It is encouraging to note that authorities are strengthening
supervision, including thorough enforcement of prudential standards,
implementation of a new capital requirement directive, introduction of risk
management and corporate governance,” he said.
According to the Consultative Group to Assist the Poor (CGAP 2015),
58 per cent of Ghanaians had access to formal financial services in 2015, up
from 41 per cent in 2010.
In spite of recorded increase in the share of Ghanaians with access
to formal financial services, the report indicated that five of the poorest
regions in the country which included Upper West, Northern, Volta, Upper East
and Brong Ahafo remained least financially.
Other demographics that lagged behind in gaining access to formal
financial services included women, rural residence and the poor.
The World Bank has, therefore, recommended a set of actions to
improve financial inclusion in the country.
These include digitisation of government and utility payments, linking informal channels with formal financial services, promoting agent banking, improving financial literacy programmes and leveraging data to improve access to finance.
By Issah Mohammed
The post GH¢5.5bn Needed To Save Microfinance Sector appeared first on DailyGuide Network.
