Government has paid all depositors in savings and loans, Finanice houses, Micro finance institutions and DKM customers

In order for all depositors of the failed Micro Finance, Finance Houses and Savings and Loans to be fully settled, the Receiver extended the deadline for the validation of claims. During the extension period, the Receiver recorded a total of new depositor claims in excess of 143,000, valued at GH¢1.76 out of which GH¢1.07 Billion has been duly validated.  The GH¢1.07 Billion validated claim has a cash component of GH¢613million, with the remaining GH¢457million being payable in bonds.

 Fund Managers (FMs), as part of the Depositor Payment Scheme under the resolution process, were to receive payment of up to GH¢170,000 in cash and the remaining in bonds. The FMs have since received payment amounting to approx. GH¢1.5billion (GH¢117million in cash and GH¢1.38billion in bonds). However, the FMs have expressed concerns that, the GH¢1.5 is insufficient to help resolve liquidity challenges in the industry. To resolve this, the Receiver, the Securities and Exchange Commission (SEC) and the Ghana Securities Industry Association are proposing adjustment to the payment structure for FMs (i.e. 20% cash and 80% bond payment for validated claims above the cash threshold of GH¢170,000). This is to bring them to par with other depositors of the resolved S&Ls, FHs and MFIs). 

Also, the Depositor Transfer Scheme (DTS), instituted in 2016 to pay all valid claims of customers of DKM, has since received a total Claims of 90,353, valued at GH¢669 million. After a validation exercise, a total claim of 88,962 was accepted valued at GH¢646 million. Out of the validated claim, a total amount of GH¢329 has been paid from the initial amount of GH¢400 million made available by the Bank of Ghana to the Receiver, leaving an unutilized amount of GH¢71 million.

Based on the above, the Receiver is requesting an additional amount of GH¢1.545 billion, to enable him pay fully the depositor claims of the resolved S&Ls, FHs and MFIs.

The Government has therefore made available an amount of GHS1.7 billion (in bonds) to meet the additional funding requirement by the Receiver (GHS1.545 billion) and to use the remaining (GH 155 million) to fund part of a proposed micro lending project to SMEs, which is currently being implemented by CBG and Jumia. This initiative is in line with the Government’s policy of digitization.

This brings the total expenditure on the financial sector interventions for the SDIs and MFIs to GHS 7.625 billion.

The decision to spend taxpayers’ funds on the bailout has been a painful exercise and deprived the Government of resources which could have been used for infrastructure development and other critical expenditures. However, Government has the responsibility to care for its citizens, hence the intervention. Besides, a sound and resilient financial sector constitutes an aspect of national security. It is, therefore, a critical public good that needs to be protected from collapse at all cost with public money whenever the need arises.

In 2019, the Bank of Ghana revoked the licenses of 23 Specialized Deposit Taking Institutions (SDIs), and 347 Micro Finance Institutions (MFIs) due to various regulatory breaches.  Subsequent to that about 4.6 million depositors’ funds were saved which required the Government to strategize to bailout depositors of the defunct financial institutions. The Government therefore made available funds in an amount of GHS925 million to salvage depositors of the resolved SDIs and the MFIs.

Also, with the President’s directive in March, 2020 that all depositors of the resolved SDIs and MFIs must be fully paid, an amount of GHS5 billion (in a combination of cash and bonds) was spent through the Receiver’s paying agent, Consolidated Bank Ghana (CBG) to fully settle all affected depositors of the resolved entities.

Government is committed to paying all depositors in this failed financial institutions as evidenced by the additional money that Government has released to the Receiver to pay late claims and to provide liquidity in the financial system. It is important to note that this payment includes depositors of DKM which failed during the time of office of the previous government and nothing was done about that and it is now that this caring Government is making sure that peoples savings and pensions are protected. With this, the only outstanding industry which is yet to be catered for by the Government is the failed asset management companies under the SEC which hopefully will be addressed very soon.

Source: Ghana/otecfmghana.com