BOG to Rescue Microfinance Depositors; As Gov’t Sets Up Deposit Protection Scheme
The Ministry of Finance and Economic Planning on behalf of government of Ghana, has secured a Fourteen Million Euros (€14m) loan facility with the Kreditanstalt fur Wiederaufbau (KFW), Frankfurt am Main, made up of a loan facility of €13m and a financial contribution of €1m for the establishment of a Deposit Protection Scheme in Ghana.
The Scheme is intended among other things, to protect the savings of small and unsophisticated depositors, especially in the event of a bank failure or closure.
It would be recalled that, following the restructuring and liberalization of the financial sector in the 1990s and subsequent reforms undertaken aimed at making the financial sector more stable and sound, coupled with general economic growth and expansion, financial intermediation has increased in Ghana, and a number of non-bank financial institutions have emerged, albeit with its numerous attendant problems, and these have affected public confidence in the sector greatly.
It would also be recalled that the country has been rocked with several incidents of microfinance and non-banking financial institutions allegedly ‘bolting’ with customer’s deposits, some of which even became electioneering issue during the 2016 electioneering period; DKM, Dwadifo Adanfo and the rest.
In view of the foregoing, the Loan and Financing Agreement was laid in the House on the 2nd of March, 2018 by the Honourable Minister of Roads and Highways, Kwesi Amoako-Atta on the Minister of Finance, aimed at addressing the general issues concerning the security of depositor’s monies with financial institutions.
The Agreement was therefore referred to the Finance Committee pursuant to Article 103 of the 1992 Constitution and Orders 169 and 171 (1) of the Standing Orders of Parliament.
- The Loan Agreement is aimed at providing funds for the establishment of a Deposit Protection Fund, intended to protect depositors from loss in the case of a bank failure.
- It is also to support the Bank of Ghana in meeting one of its objectives of fostering the soundness, solvency and efficient functioning of a stable, market-based financial system in Ghana.
- As part of measures aimed at sustaining the scheme, banks and specialized deposit taking institutions licensed by the Bank of Ghana would be required under Act 931 to make premium payments to the fund.
The Committee in presenting their report was of the view that, the move would make an important contribution to the maintenance of a sound and stable banking sector.
Members hailed the move by the Bank of Ghana, except with a section of the Minority who were of the view that the Bank of Ghana on its own is highly placed and capable of being able to raise the €14m, in order to avoid excessive borrowings, especially in view of the President recently much touted slogan of “Ghana beyond aid”.
The Minority Leader, Hon. Haruna Iddrisu in supporting the approval of the Loan Agreement, advised government to give timelines for the implementation of the ‘Ghana beyond Aid’ slogan, so that it becomes a national policy and not mere rhetoric.
Story: Frederick E. Aggrey