‘Financial Sector Reforms Need Commonsense Approach’

Alliance for Accountable Governance (AFAG), pressure group, has called for ‘commonsense’ approach in reforming the country’s financial sector.

AFAG, in a statement, lauded plans by the Bank of Ghana (BoG) to focus to Savings and Loans Companies (SLCs) in its efforts to sanitize the financial sector.

It said 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 reforms have 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’s therefore prudent for the BoG to wrap up the issues of the banks before bashing into the lower sectors,” it added.

According to the statement, “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 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 BFT’s front page story last week headlined ‘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 action on the operations of SLCs should be around June 2019 by which time the current dust and uncertainty in the financial space might have settled,” the statement said.

“After that, the BoG should take a “commonsense 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. His penchant for media attention and intertwining such critical reforms stages in public speeches is unnecessary.”

It disclosed that“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 revealed that “the Central Bank must be out to reform the banks and not crush them. What is happening is to the contrary.  It’s crucial for the BoG to approach the reforms with a human face using basic commonsense approach.”

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