BoG reforms must not suppress money trade – GUTA

The Ghana Union of Traders Association (GUTA), has commended the Bank of Ghana (BoG) and the government for successfully reforming the banking and other deposit-taking institutions sector.

However, it said the aftermath of the exercise should be “properly managed” to ensure that it does not “suppress the trade of money.”

It said much as the exercise was necessary, there was the need to ensure that it does not undermine the operations of microfinance institutions (MFIs) in favour of the commercial banks.

Subsequently, it has recommended that BoG and the government support the MFIs that survived the reforms to be stronger and more robust in order to make up for the other 347 microfinance companies that lost their licences to the exercise.

The President of GUTA, Dr Joseph Obeng, made the appeal in an interview with the Daily Graphic on Sunday (September 01, 2019).

He said although the association’s activities were affected by the operations of all financial institutions in the country, majority of its members did business with the MFIs and that made GUTA an interested party in the welfare of those companies.

Victims of clean up exercise

Dr Obeng was speaking to the paper on the recently concluded BoG reform exercise, which started in August 2017 and ended August this year.

The exercise saw the licences of almost half a million licences issued by the central bank revoked in a far reaching effort that the BoG said was necessary to sanitise the deposit taking sector and regain public confidence in the players.

The licences of 347 MFIs were revoked and their assets and liabilities transferred to a Receiver, Mr Eric Nana Nipah of the PricewaterhouseCoopers (PwC).

Trade of money

Making his first comments on the matter, Dr Obeng said GUTA was convinced that the exercise was in the right order.

He said the inactivity and the poor operations of financial institutions were affecting the operations of players in the informal sector, particularly members of GUTA.

Dr Obeng cited an instance where a member of the association deposited GH¢100,000 with one financial institution on Friday but could not access it the following Monday.

“The institution tossed this person till today and so there was no hope of him accessing the money again.

“So, when they revoked some of the licences and said they will pay the depositors, it has brought relief to us,” he said.

Making specific reference to the MFIs subsector, the GUTA President said the association was hopeful that the exercise would further improve the flow of money to help boost trade.

He, however, noted that with these institutions being fragile, yet pertinent to the wellbeing of the informal sector, BoG and the government needed to properly monitor, evaluate and revamp the operations of the surviving ones in a manner that ensures that they were able to offer optimal services to their clients.

“The microfinance scheme is helping a lot, especially the informal sector, whose players do not normally want to go through the frustrations in the mainstream banking sector to access credit.

“So, they need to be managed in such a way that you do not suppress the trade in money.

He said experience showed that players in the informal sector preferred doing business with MFIs and not commercial banks, making it necessary for the country to have a strong and robust non-bank financial sector.

Dr Obeng said beyond technical assistance, the government and BoG could consider financial support to the MIFs to help strengthen their finances and make them stronger to be able to facilitate trade the more.

Permanent solution

The GUTA President said BoG and the government must ensure that the challenges that informed the central bank reforms do not recur.

This, he said would help instill public confidence in the operations of financial institutions and eliminate the inconvenience that such challenges bring to businesses.