BoG revamped supervision to avert banking failures again - Elsie Addo Awadzi

To mitigate the risk of reoccurrence of mass failures in the Specialised Deposit-Taking Institutions (SDI) sector the Bank of Ghana (BoG) has revamped its supervision of the sector and is working on new rules on corporate governance and risk management to guide operators in the sector, Elsie Addo Awadzi, Second Deputy Governor of the Bank of Ghana (BoG) has said.

Following the cleanup of the (SDI) sector, she said, there are currently 25 Savings and Loans Companies, 15 Finance Houses/Leasing Companies, 137 Micro Finance companies, and 144 Rural and Community Banks, currently operating.

The operationalization of the Ghana Deposit Protection Scheme in October 2019 will also help to protect small depositors of SDIs if they fail.

She said these in her opening remarks at Specialised Deposit-Taking Institutions (SDI’s) media sensitization on Tuesday, October 13,

Mrs Awadzi further indicated that the Bank of Ghana continues to engage with the SDI Associations to explore how best to reposition the sector going forward.

“In the meanwhile, we expect SDIs to refine their business models and ensure that they are aligned to the policy objective for which the sector was created.

“In the case of the Savings and Loans Companies and Finance Houses Companies, the policy objective is to fill the “missing middle”, i.e. segments such as the SME sector, that the banks typically would not service. For Microfinance Companies and Microcredit Companies, we expect them to continue to expand access to finance to the informal sector, micro-businesses, low-income households, and marginalized groups such as women entrepreneurs, youth entrepreneurs, start-up businesses, and similar groups.

“Altogether, we expect the SDI sector to be the key delivery channel for financial inclusion, a key requirement for Ghana’s socio-economic advancement. There are still many Ghanaians and businesses that do not have access to savings products and credit facilities, and this presents opportunities for the SDI sector to grow. Under the National Financial Sector Development and Inclusion Strategy (2018-2023), Government expects an increase in access to finance from the current rate of 58 per cent to 85 per cent by 2023.

“To stay true to their mandate, and to stay relevant in our fast-evolving technology-driven financial industry, SDIs must prioritise good governance including strong internal controls and risk management, and customer care, and ensure that they keep their eye on the quantity and quality of capital they have when making business decisions.

“We expect them to embrace digital financial services to provide more financial services on a cost-effective basis to the vulnerable groups in our society. They can, however, only do this when they have the right amounts of capital to invest in cutting-edge technology, strong and independent Boards of Directors, expert human capital, and effective internal controls.

“Given the SDI sector’s importance to the economy, the Bank of Ghana has provided regulatory reliefs to help support the sector and their customer base during the ongoing COVID-19 pandemic. Among other things, we have reduced their liquidity reserve ratios, and adjusted their loan-loss provisioning rules, to allow them to provide loan repayment moratoria and other reliefs to their customers who are some of the worst-hit by the pandemic.

“Let me conclude by reiterating the commitment of the Bank of Ghana to building resilient and robust banking and SDI sectors that contribute positively to economic growth and development. Our regulatory measures will continue to promote stability, integrity, and inclusiveness in our financial system.

“I wish you all gathered here today, mutually-beneficial discussions. This event presents a rare opportunity for the SDI Associations to better explain the operations of their sector to the media, and for the media to ask questions and to provide feedback to the Associations on perceptions of customers and the general public as far as SDIs are concerned.

“We need the media to be a real partner that understands the financial sector and the regulatory framework within which it operates, in order to lead the public discourse in a dispassionate and expert manner. I am confident that today’s event will help in that direction. Thank you all for your kind attention!” she said.