The Bank of Ghana (BoG) is developing new rules on corporate governance and risk management for the Specialised Deposit-Taking Institutions (SDIs), Second Deputy Governor, Mrs Elsie Addo Awadzi, has said.
Speaking at the BoG/SDI Media Sensitisation workshop in Accra on Tuesday, Mrs Awadzi said the new guidelines had become necessary for the sector to mitigate the risks of recurrence of mass failures in the SDI sector.
She said the BoG had revamped its supervision department to enable it to effectively supervise the regulated financial institutions.
The Second Deputy Governor indicated that the BoG in May last year had to revoke the licences of 347 insolvent microfinance , 39 microcredit , 15 insolvent savings and loans and eight finance house companies.
Mrs Awadzi explained that the licences of those companies had to be revoked because they were no longer able to honour their obligations to
their customers, adding that the exercise was to protect depositors of those institutions.
She said a number of the savings and loans companies and finance houses strayed away from their mandates and tried to operate as banks without the requisite amounts of capital or the expertise to manage the risks they were taking.
The Second Deputy Governor said instead of taking small deposits and lending small amounts of money per customer, they took large deposits and gave out large loans, and placed significant amount of funds with other SDIs and related parties with little or no prospects of getting back those funds.
“Essentially, it is these factors, namely poor capitalisation, poor business models, poor governance and risk management, and in some cases fraud and dishonesty that led to many of these institutions collapsing in the last few years starting with the famous or infamous DKM in 2016, and subsequently many more,” Mrs Addo said.
The Executive Secretary of the Ghana Association of Savings and Loans Companies (GHASALC), Tweneboah Kodua Boakye, said the SDI sector, comprising micro-finance , and savings and loans companies, finance houses and rural banks, contributed significantly to the development of the country.
He said the GHASALC, Association of Finance Houses, Ghana Association of Micro-finance Companies alone employed about 11,400 direct employees in addition to their tax obligations to the state.
Mr Boakye indicated that the sector was helping promote financial inclusion and providing access to the under-served communities to have access to financial services.
He, therefore, entreated the government and development partners to support the sector to thrive.
Mr Boakye said companies in the SDI sector were now well positioned to play their financial intermediation roles for the lower end of the financial market.
He said the SDI sector players had instituted strong corporate governance and risk management structures in place to protect their operations.
Mr Boakye encouraged the media to highlight the positives of the industry for patronage to make the sector thrive.