A Financial Economist, Dr Lord Mensah has expressed doubt about the ability of the receiver of the now defunct 347 microfinance companies, to be able to pay all the affected depositors their full principals in addition to their interests.

The Bank of Ghana (BoG) had earlier indicated that it had secured about one GHC 1 billion to begin sanitising the country’s struggling microfinance sector.

But in an interview with Citi Business News, Dr. Lord Mensah said the higher than normal interest rates usually promised by Microfinance Companies will make it impossible for the Central Bank to honor its promise to depositors.

“The interest rates that some of the Microfinance companies were parading on their deposits were so huge that I don’t think Bank of Ghana would be ready to absorb them. So we should expect the BoG to reduce the interest rate for some depositors and that of course will have an impact on the confidence of these depositors as far as the financial system is concerned.”

Receiver to pay creditors within a month

All persons entitled to claims from any of the collapsed microfinance companies should expect payment at least from the next one month.

It will however follow the completion of validation for such claims by the Receiver, Eric Nana Nipah of PricewaterhouseCoopers (PwC).

The latest directive was contained in a statement issued by Mr. Nipah. Per the mandate of the receiver, all persons and institutions entitled to payments by the affected companies are expected to complete proof of debt forms with relevant documents to back the claims.

Upon receipt of these documents, the Receiver is expected to validate the claims before he can initiate payment. But such payments are expected to be effected after thirty days of receiving the claims.

“Creditors will be required to submit their claims by completing a PoD form to be designed by the Receiver. In filling these forms, Creditors will be required to attach relevant documentation supporting their claim(s) as well as amounts owed to them,” portions of the statement said.

It added, “the Receiver estimates that the process of validating and agreeing Creditor claims will take another 30 days from the date of the deadline for the submission of Creditor claims.”

Meanwhile the Receiver says it is currently assessing the state of affairs of the microfinance institutions in order to ascertain the types and values of their assets and liabilities.

This is expected to be completed within ten days.

“It is the intention of the Receiver to conduct an assessment of the state of affairs of these institutions in order to ascertain the types and values of assets and liabilities of these microfinance companies as at the commencement of receivership. The Receiver estimates that this assessment will be completed within the next 10 days.”

The Bank of Ghana, on May 31, 2019 revoked the licenses of three hundred and forty-seven microfinance companies and thirty-nine micro credit institutions for being insolvent.

The move follows a similar one carried out by the regulator in the banking sector over the last two years.

It is amongst others to sanitise Ghana’s financial sector by protecting depositor funds and renew confidence.

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

The move is part of cleaning up the 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, said at a Monetary Policy Committee (MPC) news conference in Accra on Monday that 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.

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

“I am not sure we have the budgetary resources to undertake a clean-up of this magnitude,” Dr Addison said.

“We simply don’t have GH¢7 billion to clean-up the entire non-bank, deposit-taking institutions and so we are tackling the microfinance sector, for which GH¢900 million has been provided,” he stated.

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.

Pleading for time

Dr Addison, 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 when pushed to provide timelines.

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

The amount represents deposits currently locked up in 272 RCBs and microfinance companies which are either in distress or had folded up as of last year, the governor said.

In terms of significance, the deposits in distressed MFIs form 8.81 per cent and 52.49 per cent of total deposits of the RCBs and MFIs.

World Bank money

Last year, Parliament ratified a $30-million World Bank credit facility agreement to implement the financial sector development programme (FSDP) aimed at improving the regulation of the MFI and rural banking sectors to make them more accessible to the banking public at the grass-roots level.

The new funding will enable the BoG, in collaboration with the Ministry of Finance, to implement and enforce an array of corporate governance, risk management, enhanced capitalisation and financial reporting measures which the central bank has drawn up but which, so far, have not been implemented because of resource challenges.

Distressed figures

Currently, out of the 566 licensed MFIs in 2018, “211 are active but distressed or folded up”, while out of the 141 RCBs, 37 were active but distressed or folded up, the BoG said in its MPC report.

In total, the bank estimates that 272 out of the 707 institutions in the sub-sector, representing 38.5 per cent, are at risk.

Policy rate maintained

At the news conference, Dr Addison also announced the decision to maintain the policy rate at 16 per cent for the second time, explaining that inflationary pressures were being controlled.

He said the MPC’s decision had become necessary to sustain the gains the committee had made over the past two or so years.

He said the exchange rate performance since the beginning of the year had put pressure on the prices of goods and services and the BoG’s decision was to keep its rate unchanged to ensure that inflation did not inch up further.

The Monetary Policy Committee of the Bank of Ghana kept the policy rate unchanged at 16 per cent for the second session in a row, citing rising inflation expectations in emerging economies.

Addressing a press conference in Accra on Monday, Dr Ernest Addison said the recent exchange rate pass-through had slowed the disinflation process, leading to a slightly elevated inflation profile.

Annualized inflation rose for a third time in a row to 9.5 per cent in April, while the Ghana cedi currency, which had seen a bout of volatility in the first quarter, depreciated 5.8 per cent in the year to May 23, compared with a 0.2 per cent for the corresponding period of 2018.

Dr Addison said economic growth remained steady and was projected to gain some additional momentum over the horizon, supported by crude oil production.

“Early indications already show that economic activity in the first quarter is picking up pace as evidenced by the Bank’s CIEA. Other factors such as improving business sentiments and credit growth are supportive of growth in the outlook,” he said.

On fiscal developments, Dr Addison said the Committee noted that implementation of the budget in the year to April 2019, showed continued challenges with revenue mobilization alongside increased pace of spending, which posed some risks to the fiscal outlook.

“Expenditure pressures have been exacerbated by payments associated with the energy sector. These are exerting financing pressures on government and more stepped-up efforts would be required to ensure total realignment of expenditures to revenues,” he said.

Total public debt rose to 57.5 percent of GDP (GH¢198.0 billion) at the end of March 2019 compared with 49.5 percent of GDP (GH¢147.9 billion) at the end of March 2018.

Of the total debt stock, GH¢11.0 billion (or 3.2 per cent of GDP) represented bonds issued to support the financial sector clean-up.

Dr Addison said private sector credit growth continued to gain traction as banking sector liquidity improved supported by the recapitalization exercise.

Annual growth in private sector credit was up by 19.8 percent in April 2019, compared with 5.6 percent growth in the same period of 2018.

On a year-to-date basis, private sector credit recorded a 5.1 percent growth in April 2019, compared with a contraction of 4.0 percent last year.

In real terms, private sector credit expanded by 9.4 percent.

On the execution of the budget, provisional data for the first quarter of 2019, showed an overall deficit (on cash basis) of 1.8 percent of GDP against the target of 1.4 percent of GDP and a primary deficit of 0.8 percent of GDP compared to a targeted deficit of 0.3 percent of GDP.

The higher-than-projected fiscal deficit outturn was due to the lower-than-projected domestic revenue collections which were not accompanied by expenditure rationalization.

The revenue shortfalls were mainly from personal income taxes, import duties and levies, and non-tax revenues.

Over the quarter, total revenue and grants amounted to GH¢10.1 billion compared with the programmed target of GH¢12.4 billion. Total expenditure was GH¢16.5 billion, slightly below the target of GH¢17.3 billion, and representing a 37.7 percent annual growth.

The Gross International Reserves (GIR) as at end of April 2019 was US$9.3 billion (4.7 months import cover), largely on account of energy-related debt payments and higher obligations associated with externally held domestic debt payments.

The National Plant Protection Organization (NPPO) has suspended, indefinitely, the export of Capsicum, Solanum, Luffa and all leafy vegetables to any international market.

The suspension is expected to take effect from June 1, 2019.

A statement signed by Dr. Felicia Ansah-Amprofi, Director Plant Protection and Regulatory Services Directorate of the Food and Agriculture Ministry explained rationale behind the decision:

1. The high level of local interceptions at the exit points

2. The alarming rate of external notifications, we receive at least three notifications a week and

3. The new EU directives to all countries to re-provide dossiers to the EU on the management of harmful organisms on some of the above vegetables.

“Ghana has recently come out of a ban and as such we are still on the red list and being monitored closely. We are only five months into the second year, however, the number of notifications is increasing, and if we are not careful the European Union will ban Ghana again,” the statement dated May 23 said.

Last year for instance, internal interceptions amounted to 162 while external notifications were 53 due to harmful organisms, it said.

The Directorate said it will use the suspension period to address all possible loopholes and challenges before resumption of the export of these commodities.

“We are very much aware of your effort and investment that has gone into this business but as regulators we cannot sit and watch the whole vegetable sector to be banned by EU again,” vegetables and food items exporters of Ghana told.

Nene AshaleyAdjabeng, Anum-Apapam Chief Farmer in the Eastern Region, said the country’s cocoa has high theobromine, thus making it the best cocoa for high-quality chocolate.

Nene Adjabeng was delivering a talk on “Premium Cocoa Beans” at AnumApapam in the Ayensuano District in the Eastern Region.

The participants included; cocoa farmers, cocoa marketing clerks, hawkers of cocoa drinks and a section of the public.

The Chief Farmer, who is also the Ga Dangbe Chief for the area said, throughout the world, the standards against which all cocoa were measured was those of Ghana’s Cocoa and that the high-quality cocoa beans of the country still continued as the preferred choice of all chocolate and cocoa beverage producers of high reputation.

Nene Adjabeng observed that this status was diligently maintained over the years, through the effective quality control practices of Ghana’s Quality Control Division of COCOBOD.

The Chief Farmer said the international cocoa standards required cocoa of merchantable quality to be fermented, thoroughly dried, free from smoky beans, free from abnormal or foreign odour and free from any evidence of adulteration.

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