Bank of Ghana secures another $170.8 million to clean up troubled microfinance companies and rural and community banks

The Bank of Ghana (BoG) has received another $170.8 million (GH¢900 million) to undertake a clean-up of the troubled microfinance sub-sector of the financial services industry.

The Governor of the Bank of Ghana (BoG), Dr Ernest Addison

The move is part of cleaning up the $1.3 billion (GH¢7 billion) debt crisis that has hit a large sector of the deposit-taking, non-bank institutions, including savings and loans companies, in the country.

The Governor of the BoG, Dr Ernest Addison, made the revelation at the Monetary Policy Committee (MPC) press briefing held in Accra on Monday, May 27, 2019.

According to him, the magnitude of the resources needed to embark on the entire reforms of the deposit-taking, non-bank sector was so large that it had to be approached in phases.

“I am not sure we have the budgetary resources to undertake a clean-up of this magnitude,” he said, adding that, “We simply don’t have $1.3 billion (GH¢7 billion) to clean-up the entire non-bank, deposit-taking institutions, and so we are tackling the microfinance sector, for which $170.8 million (GH¢900 million) has been provided,” Addison said.

A similar exercise with the universal banks, which ended in December last year, cost the country almost $2 billion (GH¢11 billion), and it is feared that plans to replicate it for non-bank financial institutions (NBFIs) will prove costly for the country.

The clean-up of the microfinance sector, which is expected to begin by the end of the third quarter of the year, will significantly trim down the number of microfinance companies in the country.

The governor, however, pleaded for time to come up with clear guidelines on the scope of the clean-up of the microfinance sector.

“Give us a little space, and we will communicate the fine details of our decisions later,” he said.

Recently, the finance minister, Ken Ofori-Atta disclosed that the government has secured a $135 million (GH¢700 million) fund to clean up the operations of Non-Bank Financial Institutions (NBFIs) and make them more solid to be able to support economic growth meaningfully.

The fund according to him was a request from the Bank of Ghana to help with the cleaning of the NBFIs.

About 705,396 depositors of distressed or collapsed microfinance companies and rural and community banks (RCBs) risk losing a total of 740.5 million (GH¢740.5) million if their financial resources are not shored up swiftly.

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