BoG must come clean on MFI job losses – GNCCI

The central bank must be clear and concise in its data about job losses in the ongoing reforms of microfinance companies, since its current position about “little or no job losses” cannot be substantiated, the Ghana National Chamber of Commerce and Industry (GNCCI) has pointed out.

“The BoG’s anticipation of little or no job losses is untenable and shrouds the concomitant issues surrounding the collapse of these companies. The BoG must come clear on the data, and needs to engage stakeholders in addressing any potential job losses associated with the on-going reforms,” the GNCCI, the representative voice of the business community, said in a statement to the B&FT.

On May 31, 2019, the Bank of Ghana (BoG) revoked the licences of 347 insolvent microfinance companies, with government – through the Finance Ministry – making available GH¢900million to enable the Receiver pay depositors after validation of claims.

With the revocation of those institutions’ licences, and no announcement of mergers or acquisitions for them, what this means is that those companies no longer exist and jobs are lost forever. By estimation, job losses will be in the 1,000s if, conservatively, each one of the 347 employed just 10 people.

This action, the central bank Governor Dr. Ernest Addison noted, forms the second phase of on-going reforms in sanitising the financial sector toward improving operational resilience and confidence in the system.

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But analysts and trade associations, including the GNCCI, believe that despite the good work of the regulator in cleaning up the sector, accurate data on job losses and associated losses must be properly communicated by the central bank, so that the true scale of the reforms can be seen by all.

“The GNCCI commends BoG for the steps taken in revoking the licences of those insolvent companies and government’s release of funds, given the imminent threat they pose to stability of the financial system, depositor’s funds, and small businesses.

“Nonetheless, the GNCCI is worried over the increasing number of failures and the collapsing of financial institutions by BoG. The disappearance of these businesses raises critical questions about operational resilience and our collective effort at building and supporting Ghanaian businesses to participate in the inclusive growth agenda with improved collective efficiency,” the statement added.

While bemoaning the collapse of these companies and consequent impact on the economy, the GNCCI urged the BoG to strengthen its supervisory and regulatory mechanism in ensuring strict compliance by such companies with industry standards to avert future collapses.

“These companies are crucial in providing financial support and assistance to small businesses and individuals, who may have limited access to the traditional banks’ products given the requirements.

“The issuance of licences must be supported with proper and robust enforcement mechanisms, as well as avenues to continuously build the capacity of these Specialised Deposit-taking Institutions (SDIs) to mitigate risks and improve operational resilience and compliance.

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“There is need for a conscious and collective effort to support and develop Ghanaian businesses to succeed. The GNCCI calls for better regulation in the financial sector that reflects the needs of the sector with more positive impacts; and addresses critical issues such as regulatory lapses, weak enforcement and compliance,” it added.

It is the GNCCI’s expectation that the remaining 137 microfinance companies and 31 microcredit companies will demonstrate good faith and constantly monitor and manage their risk exposures in building a healthy financial services system.

While commending the process initiated for payment of verified claims at designated financial institutions, the GNCCI urges the Receiver and BoG to take into account the proximity between these institutions and depositors, particularly those living in the rural and peri-urban areas to minimise additional cost in accessing depositor’s funds.

“Government must continue to provide the right incentives on time to enable these institutions to deliver on their mandates.”

The Chamber also assured the private sector that it will continue engaging government, the Bank of Ghana and other relevant stakeholders to ensure a safe, sound, supportive and stable banking sector, and the larger financial sector – noting that this will help provide affordable credit that enables small businesses to grow and create more sustainable jobs.

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