Banks’ collapse a big warning to local businesses — Prof. Quartey …they must run on strong structures

Prof-Peter-Quartey

The collapse of the seven indigenous banks should serve as a strong warning and big lesson for other local businesses to run their companies on strong structures or they will suffer the same fate, Professor of Economics at the University of Ghana, Peter Quartey, has said.

The Bank of Ghana (BoG), in its report after the collapse and merging of five banks – namely Unibank, The Royal Bank, Sovereign Bank, Construction Bank and Beige Bank – indicated that some of these banks were run by directors who werere family and friends of shareholders.

This, Prof. Quartey said, is typical of many Ghanaian businesses – as companies are managed by owners and cronies rather than strong corporate governance and structures, leading to many problems.

“It is very peculiar to Ghanaians. We don’t like partnerships and sharing in ownership with others. Business is done with family members and cronies alone, and that is very serious. If you go to Kenya, you will find big conglomerates that are formed by partnerships.

“But in our case, you only see families and cronies running a business with no structure and poor succession plans; so, you are bound to find these problems. Most people die with their businesses.

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“So, I think it is a wake-up call for local businesses to structure their governance systems beyond their owners. We should move away from the owner system and get qualified people to run our businesses for us,” he told the B&FT in an interview.

Prof. Quartey further debunked assertions that the collapse and merger of the 5 banks into Consolidated Bank Ghana Ltd. will affect the growth of local businesses – saying other banks are available to serve their needs.

“If we allow the banks to fail rather than the central bank intervening, the repercussions will be much more severe than we expect. Confidence should remain because, so far, no depositor has lost his money; and that is what the central bank is set to do – to ensure that depositors do not lose their funds in situations like this.

“So, I think local businesses should not panic that the local banks’ collapse will affect them. After all, the foreign banks and rest of the local banks are there and also helping businesses. The only thing I see for now is that banks are going to be more careful in lending to businesses, and that is the right for them to do—they must be prudent in lending,” he said.

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