Declining trade volumes and values due to COVID-19 disruption in supply chains globally has had a serious effect on the wholesale, retail and distribution business in Ghana; thereby causing a ripple-effect on Specialised Deposit-Taking Institutions (SDIs).
In March 2020, the Bank of Ghana (BoG) announced a number of monetary policy interventions including a cut in policy rate by 150 basis points to 14.5 percent; and loan repayments past due of Microfinance Institutions for up to 30 days shall be considered as ‘current’, as is the case for all other SDIs.
Despite these cushioning measures, SDIs are struggling to stay on their feet; and the contraction in business threatens the survival of Savings & Loans companies (S&Ls) and microfinance companies, particularly coming after the financial industry clean-up by the Bank of Ghana.
Managing Director-Golden Pride Savings and Loans, Johnson Boadi Asamoah, speaking at a webinar recently organised by Krif Media noted that the institutions are at risk because of their dependence on short-term funding, interbank liabilities, and high concentration in sectors particularly affected by the COVID-19 shock.
“MFIs’ portfolios are under stress as a result of lending to households with volatile income and no assets, and some may be unable to maintain liquidity and solvency.”
The decline in income and revenue means borrowers cannot meet their obligations, and as a result the stability of the S&L sub-sector in the country is threatened by the likelihood of a sharp increase in non-performing loans.
What double jeopardy, particularly for the microfinance and savings and loan companies who are just about recuperating from the financial sector clean-up and are struggling to stay afloat and be competitive.
To this end, some are clamouring for an engagement with the regulator so as to dialogue with the associations of S&Ls, finance houses and microfinance companies to adopt policy interventions that highlight their financial restructuring to help them survive these challenging times.
An asset quality review carried out by the BoG in 2015 and 2016 revealed severe challenges with solvency, liquidity and asset quality in Ghana’s banking industry, with some banks showing significant under-provisioning and capital shortfalls.
A similar clean-up process was also applied to the microfinance and non-banking financial institutions sector, which resulted in hundreds of licence withdrawals.
The regulator justified its decision on the grounds that the institutions had no reasonable prospect of recovery, and that their continued existence “posed severe risks to the stability of the financial system and to the interests of their depositors”.
Infectious Disease Isolation Centre completion attests to ‘can-do’ spirit of Ghanaians
The launch by Vice-President Dr. Mahamudu Bawumia of the US$7.5million Infectious Diseases Centre built by the Ghana COVID-19 Private Sector Fund, at the Ga East Municipal Hospital, is something worth celebrating.
Dr. Bawumia noted that the Centre celebrates Ghanaian ingenuity and patriotism, and dedication to humanity. The world-class facility was constructed by a team of 536 men and women working 24 hours a day, who worked tirelessly to build the facility.
Co-Chair, Board of Trustees of the COVID-19 Private Sector Fund and Fidelity Bank’s Chairman, Edward Effah said: “The COVID-19 Private Sector Fund’s mission is to provide a prompt response to the hardship and suffering arising out of the COVID-19 pandemic. We sought to bring to bear the agility and responsiveness of the private sector to support government in fighting spread of the virus”.
He noted that the Facility 100 Project seeks to develop four 100-bed infectious Disease Centres in Accra, Kumasi, Takoradi and Tamale. Tony Oteng Gyasi, Co-Chair of the Board of Trustees of the Fund and Chairman of Tropical Cables and Conductors Limited, advised that the facility should be well-maintained to benefit the nation for many years.
This is crucial, because though the private sector initiative is laudable and has to be highly commended for its saving grace, it will amount to little if the proverbial Ghanaian maintenance culture is allowed to continue.
World-class infrastructure facilities exist in the country, but our penchant for not maintaining same gives them a rather short life-span – and the Accra-Tema Motorway is one typical example. Hence, as Mr. Oteng-Gyasi stated, managers of the facility should ensure it is taken care of so that many more generations can benefit from its purpose.
This combined action by key players in the country’s private sector to construct such a facility in record time as part of measures to contain spread of the deadly COVID-19 pandemic demonstrates the true philanthropic spirit of the Ghanaian, and must be applauded.