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Financial Sector Reforms Needs Common Sense Approach - AFAG   
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Ernest Addison, BoG Governor
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AFAG welcomes the indication by the Bank of Ghana to turn its attention to Savings and Loans Companies (SLCs) in its efforts to clean up the financial sector.

However, AFAG believes that it is vital for the BoG not to follow through with the SLCs while fallouts and unintended consequences of the commercial banking reforms have not been addressed. As of now, the uncertainty and chaos the reform has naturally created are yet to settle. Banks have reduced lending and financial services in some cases, are calling in loans.

Furthermore, due to uncertainties and curtailing of loans, the SLCs/MFIs are now mainly holding the forth in supporting many businesses. It is therefore prudent for the BoG to wrap up the issues of the banks before bashing into the lower sectors.

Any mistake would bring much of the economy to its knees. This is more critical when we take into consideration the fact that about 80% of SMEs are funded through them with these SMEs creating about 80% of jobs in the country. With unemployment so high with neither lasting solution nor concrete plans to remedy in place, AFAG would have thought the BoG would be circumspect, but that is not the case. The BoG is so enamoured with its statutory powers as to listen to alternative voices.

The BoG front page message on the BFT last week;" Savings and Loans Companies are next" was most reckless and irresponsible. It connotes a notion of "destruction" rather than "reforms."

AFAG holds the view that the earliest time for any direct actions on the operations of SLCs should be around June 2019 by which time the currents dust and uncertainty in the financial space might have settled.

After that, the BoG should take a position of "common-sense-approach" in the clean up instead of its current Rambo style with which it approached the banks. Another point is that the governor, Dr Addison must show maturity and refrain from media commentary. He penchant for media attention and intertwining such critical reforms stages in public speeches is unnecessary. The reforms should be carried out within the offices of the various institutions and not at front pages and online portals of media houses.

The unintended consequences of the crisis seem to be out of the consideration of the Central Bank. Unemployment is on the rise as a result of capital crunch. The staff of formers banks are arbitrarily sacked without due consideration for settlement to the extent that former manager of UT is now a kebab seller. Additionally, existing banks are reducing staff strength in even critical areas to meet the minimum deposit.

Panic withdrawal is forcing many of the financial institutions to go under. Hitherto sound institutions are all going under the pressure of uncertainty which has led to massive withdrawals.

AFAG believed that the central bank set out to reform the banks and not crush them. What is happening is to the contrary.

It is crucial for the BoG to approach the reforms with a human face, using basic commonsense approach. Ghana is more significant than anyone's ego. The Central Bank must engender confidence and further take critical actions in the sector to boost deposits. According to the Central Bank, deposits constitute 62.5% of the banking industry assets. This points to a single fact that deposits constitute the lifeline of commercial banks in Ghana. It comes as a surprise to AFAG that the BoG sleep while customers continue to withdraw their deposits at an alarming rate. Some reports put the withdrawal rate at 17%. It is reported that Unibank has its deposit portfolio reduced from GH500 million to a current paltry sum of GHC100 million Ghana Cedis. What is the Central Bank undertaking to address the lack of confidence in the banking sector? Is the Central Bank only interested in bailouts and make infamous headlines for collapsing banks?

AFAG strongly urges the BoG to demonstrate the utmost maturity, and circumspection in carrying out the overall, not-necessary-at this time, financial sector reforms. Concerning the Savings and Loans reforms, there is a clear indication that the BoG has begun on the wrong foot.

Ghana first!
Source: Peacefmonline.com

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