GH¢1.6bn payment holidays awarded to selected bank customers

Krif Media Limited, publishers of Integrity Magazine held the 2nd edition of its Covid-19 Corporate Governance Webinar Series on Tuesday, June 2, 2020, with the theme ‘Effects of COVID-19 On Corporate Ghana- The Banking Sector- Part 1”.

Notable amongst the dignitaries who were present included, Her Excellency Stephanie Sullivan, the Ambassador of the United States of America to Ghana, the Governor of the Bank of Ghana, Mr. Ernest Addison, and the 2nd Deputy Governor of the Bank of Ghana, Mrs. Elsie Addo Awadzi, who were both represented by Mr. Osei Gyasi, Head of Banking Supervision Department of the Bank of Ghana.

Dr. Juliette Tuakli, Harvard University Professor of Medicine and Board Member of Zenith Bank Ghana, Mr. Akin A. Ogunranti- CEO of Zenith Bank Ghana and Mr. Clifford Mettle- Immediate past President of the Chartered Institute of Bankers were also present.

Four Banking Industry Giants spoke on varied perspectives on the impact of the Corona-virus on their respective institutions and the banking environment in Ghana as a whole. Mr. John Awuah, Deputy CEO of Ghana Association of Bankers, Mrs. Abiola Bawuah, Regional CEO of United Bank of Africa, Rev. Mrs. Patricia Sappor, President of the Chartered Institute of Bankers and Mrs. Mary Brown, former Deputy Managing Director of Prudential Bank, were amongst the speakers.

Mr. Osei Gyasi started his contribution by bringing goodwill messages from the Bank of Ghana and congratulated Krif Media for organizing the Webinar series and made mention of his extensive interactions with them in previous events.

He explained that with banks granting moratorium and rescheduling payments there will be huge implications for cash flow in this Covid-19 period.

Mr. John Awuah, arrested the attention of all participants with his detailed presentation stating that while banks have done everything to operate a normal business, the advent of the pandemic had slowdown business and increased risk of heightened impact on loan performance.

He further explained that some sectors of the economy have had zero cash inflows during the pendency of the pandemic e.g. Aviation, hotels and resorts, bars and restaurants and their employees etc. and the projection is that it will take much longer for businesses and households to return to normal operations with its consequential impact on the ability to perform on existing obligations resulting in a heightened probability of increased non- performing loans.

He outlined some of the post-COVID-19 activities by the banks and government to help the Banking sector. Amongst which included credit expansion bias to productive sectors such as the manufacturing and SME Financing, Banks investing heavily to enhance Fintech capabilities, the Government introducing policy initiatives to redirect the trajectory of credit expansion and the Banking Regulator to proactively balance the need for regulatory prudence and inertia post-COVID.

He said that banks have a duty to anchor the economy by cautiously continuing with credit expansion to productive sectors among others.

He also mentioned that banks have cut interest rates by between 1.5% and 3.5%. In addition, a total of 1.6 billion Ghana Cedis of Payment Holidays has been granted to selected customers with specific needs during this COVID-19 period.

Mrs. Abiola Bawuah, in her presentation, said that even though Covid-19 has hit the sector hard, it has presented various opportunities for thinking outside the box and we must all learn lessons for future interventions.

Rev. Mrs. Patricia Sappor spoke about the fact that banks had begun to aggressively drive the digital agenda whilst encouraging customers to jump onto the digital train with the use of the digital channels such as Mobile Apps, USSDs, Internet Banking, ATMs to facilitate banking transactions.

“One of the key impacts of the current pandemic is the emphasis on social/physical distancing and contactless payment options. The situation presents financial institutions with the opportunity for digital transformation both at the front and back office levels. This, if done effectively could result in efficient service delivery, quicker turn-around time and improvement in the overall service experience for bank customers”.

She added that investing in large and expensive edifices to accommodate employees could be curtailed as banks have found ways for workers to work more remotely and digitally: This will reduce the operating costs of banks since lesser expenses on utilities and depreciation are incurred.

The negative impact of COVID-19 on the economy and the banking sector cannot be downplayed; She said, economic activities have taken a downturn with growth projected to be 1.5% compared to an earlier outlook of 6.5% for 2020.

According to Rev. Mrs. Sappor, banks have had to re-strategize and re-prioritize projects with the influx of the Covid-19 pandemic: Banks can no longer go back to their old ways of operating since the needs and psyche of customers have changed significantly as a result of Covid-19.

She noted that the cost implications of the new order on banks cannot be overemphasized as procurement of PPEs and other items needed for maintaining staff and customer wellbeing in order to enable the banks operate have increased their operating costs.

“In a nutshell, low transactional volumes will result in low profitability, low deposits, and significantly, high Non-Performing Loans (NPLs) and high operating costs are some of the adverse impacts to be envisaged by financial entities as a result of COVID-19. Shareholders may therefore experience low returns on their investments and some may not even receive dividends at the end of this financial year (2020)”

She recommended these steps to help reduce the negative impacts of the Coronavirus: “Banks should proactively stay in touch and build good relationships with their clients supporting them in these difficult times, Cash Collaterals can be used to pay off or pay down bank exposures to clients, banks should deepen their collaboration with the Fintech Organizations to enable them offer more digitized solutions to customers, individuals and entrepreneurs must develop a savings culture and above all, banks should continue to follow all COVID-19 protocols during this period to increase the confidence imposed in them by their customers.”

Mrs. Mary Brown in her speech suggested that Banks must set up a Special Credit Coordinating Room that will be responsible for selling and operationalizing the Bank’s Credit Strategy in response to the crisis. This coordinating room, she said, will ensure a consistent and coherent response across all aspects of the bank’s lending operating model.

Rev. Kennedy Okosun, the Publisher and Editor-in-Chief of the Integrity Magazine (the organizers of the Covid-19 Corporate Governance Webinar Series), in his address, discussed the need for stakeholders to find out how banks and other financial institutions in Ghana can better protect themselves from the harsh effects of the lockdown and still play their important role of being the “engine of growth” despite the impact of the COVID-19 on most businesses in the country.

Rev. Okosun also said that through these webinars being organized by Integrity Magazine, solutions will be proposed as to the way forward for policymakers and industry players to reduce the biting effect of the Coronavirus on Corporate Ghana.

The next Webinar will take place on Tuesday 16th of June,2020, and will focus on the Effects of Covid-19 on Corporate Ghana- Rural Banks.