A recent survey conducted by the Ghana Association of Microfinance Companies (GAMC) and Network of Microfinance Institutions in Ghana shows that deposits/savings dropped by GH¢57million between February and April 2020.
Lambert Osei Kofi, Board Chairman of GAMC, speaking at a webinar organised by Krif Media noted that by the end of 2019 most of the surviving MFIs, after the financial sector clean-up exercise, started showing signs of recovery by way of increasing profitability, increased deposits, better liquidity positions and decreasing NPLs among others – but onset of the pandemic has erased almost all the gains.
The survey showed that the sector’s savings dropped from GH¢1,116,992,304 at the end of February, 2020 to GH¢1,060,524,561 by April 15, 2020.
The adverse impacts of the pandemic have made it impossible for saving clients, especially those operating in the informal sector, to work fully and therefore unable to save adequately. Some institutions are compelled to take on additional borrowings at higher cost to meet the withdrawal requests, and others may have liquidity constraints, Osei Kofi indicated.
The pandemic is leaving in its trail virtually every facet of national life, and non-bank institutions have not been spared. Naturally, that doesn’t come as too much of a surprise since economic activity almost ground to a halt as a result of the lockdown and accompanying limited economic activity.
Therefore, many people in the informal economy do not have disposable income to save with. Once economic activity rebounds, people will begin to save and plan for their future.
As a consequence, GAMC is pleading with government to channel part of the stimulus package to MSMEs through MFCs. Finance Minister Ken Ofori-Atta will today present government’s mid-year budget review, and indicated government will roll out another stimulus package for big businesses since the initial stimulus went to micro, small and medium-scale enterprises.
Therefore, one wonders whether MSMEs will be entitled to another package as is being requested by the GAMC – even though we understand that it is meant to strengthen MFIs in the process, since the pandemic has adversely affected the savings function of MFIs.
This matter will become clearer today when Mr. Ofori-Atta presents his mid-year review budget to the august House of Parliament and announces what he has in store to ameliorate the pandemic’s harsh impacts on the economy.