Pay dying depositors with ESLA fund – Terkper

Former Finance Minister, Seth Terkper, has said the government cannot continue to assume it is impossible to pay back depositors their locked up capital after the collapse of some 347 micro-finance companies, 39 microcredit companies, 23 savings and loans and finance house companies.

According to Mr. Terkper, there is no excuse for leaving those affected frustrated, resulting in the renewed agitations because the Nana Akufo-Addo Administration can raise funds through the Energy Sector Levy Act (ESLA) fund.

Customers of failed Savings & Loans, Microfinance Institutions are bitter accusing president Nana Addo Dankwa Akufo-Addo of false hope after a promise last December, which was affirmed in his State of the Nation Address (SONA) in February that he has directed Finance Minister, Ken Ofori-Atta to release a whopping 15.6 billion cedis for full payment of all those affected.

“…I would like to repeat that all depositors of the savings and loans and microfinance institutions, including DKM which collapsed in 2015, will receive 100% of their deposits, too, once the validation exercise is concluded, and I am informed that the Receiver of the Savings and Loans and Microfinance institutions will begin, on Monday, 24th February, making payments to their customers, these monies, totaling five billion cedis, being in addition to the thirteen billion cedis being paid to the customers of the failed banks,” the president said at that time.

Mr. Terkper, who was contributing to a discussion on the issue on Accra-based Citi FM, insisted that the Energy Sector Levy, established by the erstwhile Mahama Administration to handle related shocks, was expected to generate GHS28 billion by 2022.

He asked..."Where did All the money go?".

He explained further: “…If we are talking about the payment of GHS5 billion, GHS10 billion or even up to GHS 15 billion or even GHS20 billion, there should be enough money in the ESLA fund to have paid the depositors their full amount.”

The former Finance Minister’s comment comes in the wake of complaints that, government’s decision through the Receiver to cap how much depositors with very huge figures can withdraw and the mandatory 5-year bond at zero interest or opt for a discount to receive cash payment through the Consolidated Bank of Ghana, CBG.

It is estimated that over two million customers are affected directly or indirectly by the financial sector clean up exercise but in March this year, (2020), the Receiver in a statement claimed out of over 360,000 depositor claims, which includes 39 Microcredit Companies placed under official liquidation, more than 320,000 in a number of validated claims were fully settled in cash.

It however said: “To fully settle the remaining 40,000 depositor claims in these receiverships as well as in the official liquidation of the 39 MCCs, government provided additional funding by way of a combination of cash and bonds totaling approximately GHS5 billion to the Receiver and Official Liquidator.”

Commenting on the renewed agitations, Mr. Terkper recalled that there was some restructuring in 2016 by NDC costing GHS2.2 billion as well as an injection of GHS250 million.

“It was negotiated directly with the banks and for all that we know, no haircuts were made to depositors,” he emphasized.

The former Finance Minister noted that the Mahama administration used funds from the Energy Sector Levy to bolster the financial sector.

“Therefore it is erroneous to give the impression that the former administration did not do much about the financial sector situation.” …he argued.

The financial sector clean-up commenced by the Akufo-Addo administration in August 2017, has led to the collapse of nine universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, and two non-bank financial institutions.

Last month, the official Receiver and Liquidator of the collapsed nonbank financial institutions Depositors with valid claims are to be paid by May ending, Mr Eric Nana Nipah, in a statement presented on his behalf by Information Minister, Kojo Oppong Nkrumah said: “To date approximately GHC2.11 billion has been paid in cash, while about GHC2.95 billion has been paid in bonds, bringing total payments to GHC5.06 billion.”

The disclosure confirms that more than half of the promised payment has been converted to bonds at zero interest over a 5-yr period.

Last week, Research Fellow at the Institute for Fiscal Studies, Adu Owusu Sarkodie described the development as very unfortunate. In his opinion, while government’s resolve to pay all depositors funds is welcome, its decision to convert a sizeable chunk of the locked-up capital, especially for corporate bodies and heavy investors into bonds without their input is worrisome.

Mr Owusu Sarkodie who is also a Senior Lecturer at the Department of Economics, University of Ghana asked… “Why still hold on to customers’ money?”.

Adu Owusu Sarkodie who is also a lecturer at the University of Ghana, told the media, “Most of those affected are companies, which would otherwise have reinvested their savings but have been compelled to lay off staff, with serious implications on their survival. In one MFI alone, about 1,000 staff were laid off”

The IFS Research Fellow observed that among those hard hit are traders who cannot get access to their capital through no fault of theirs.