After cleaning up the banking sector, the Bank of Ghana (BoG) is now set to raise GH¢7 billion from the government to support distressed savings and loans companies and other finance houses.
In an exclusive interview with the Governor of the Bank of Ghana, Dr Ernest Addison, at the ongoing Spring meetings of the IMF and the World Bank Group in Washington, DC, United States (US), he said liabilities of the savings and loans and other finance houses were estimated at GH¢7 billion.
Although he did not say when the clean-up exercise of the savings and loans companies would begin, it is expected that the process will begin before the end of the year.
It is, however, unclear which module the central bank will adopt: either a purchase and assumption agreement, by which strong savings and loans companies will take up selected assets and liabilities of the insolvent ones, or consolidation of all the insolvent ones into a new savings and loans entity.
The module to adopt, according to Dr Addison, was part of the ongoing discussions between the central bank and the Ministry of Finance to iron out the best module to save the sector that was almost in distress.
The government spent almost GH¢12 billion last year to liquidate seven distressed banks and the cost of cleaning up the savings and loans companies and other finance houses was becoming a burden to the government.
“We see the cost of the clean-up of the micro-finance sector as not that much, compared to what we are seeing in the savings and loans and the other finance houses, which is about GH¢7 billion.
“We have done our analysis and the estimate of the clean-up of the sector is about GH¢7 billion, which we have to find to complete the process.
“The engagement will ensure that the necessary funds can be raised on the part of the government to cushion depositors of these institutions,” Dr Addison said.
That could be one of the toughest measures the BoG is taking in recent times to sanitise the savings and loans and other finance houses sector.
He said the government would have to bear the initial cost of the clean-up exercise and later recover its liabilities from the assets of the companies.
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