Minimum capital for Savings and Loans seen rising above GH¢50m

Governor, Bank of Ghana
Dr. Ernest Addison

There are speculations that Savings and Loans Companies, one of the sub-groups of the Non-Bank Financial Institutions (NBFIs), could see their stated capital increased to GH¢50million from the current GH¢15million.

With the central bank recently increasing the minimum capital for commercial banks from GH¢120million to GH¢400million, which is a 233 percent increment, players in the savings and loans space believe it could be their turn very soon.

“We believe that just as banks have gone up to such a level, we could be heading in the same direction. When banks were moved to GH¢60million, we were moved from GH¢7million to GH¢15million,” the managing director of one of the savings and loans companies told the B&FT.

Although there has been no official communication from the central bank in this regard, industry players speculate that an increase in their minimum capital could be between GH¢50million and GH¢70million.

Managing Director of Commerz Savings and Loans, Dr. Edem Bart Williams, also noted that there are shareholder engagements going on – so that savings and loans will be ready when the central bank makes the announcement.

“We have been engaging shareholders and we have had discussions that they have to be ready to raise the capital. Anytime they raise that of the universal banks, they raise that of the savings and loans. We are all playing in the same market,” he said.

He noted that although everyone is getting ready, not every player will be able to meet the requirement – and so some will have no option but to consolidate. “Some are struggling to meet the current one, so they have no option but to consolidate and that will shrink the numbers in the industry,” he said.

Governor of the central bank, Dr. Ernest Addison, has been talking tough about the need for adequate liquidity in the financial intermediation space. He told journalists in September that any commercial bank that could not meet the required stated capital could downgrade to a lower-tier deposit-taking financial institution.

“If you think that you are operating in a niche that does not require you should have a GH¢400million level of capitalisation, you can choose to go for a savings and loans licence,” he said.

Savings and loans companies, which are currently 38 in number, saw their capital increased to GH¢4million in 2011 and then move up to GH¢7million a year later. In 2014, the central bank asked them to double it to GH¢15million without a specific deadline.

The 2016 annual report by the Bank of Ghana stated that the NBFIs sector ended the year with a total asset value of GH¢9.6billion, up by 31.4 percent from GH¢7.3billion in 2015.

The growth was underpinned by 54.1 percent and 25.5 percent increases in investments and loans & advances respectively. The major source of funding was deposits, which stood at GH¢5.8billion at end-2016 – accounting for 60.2 percent of total assets.

Deposits grew by 44.7 percent year-on-year in December 2016, compared to the 30.3 percent recorded in 2015. The high deposit growth can be attributed to the aggressive deposit mobilisation effort and high interest rates offered particularly by the S&L category.

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