Locked-up funds: Rural banks demand GH¢500m from govt

THE National Association of Rural Banks says it will continue to pressure  government to release the GH¢500 million locked-up funds.

“It’s about five years now but we are not going to write the figure off in our books. Write-off is not an option to us at all,” the President of the association, Eric Daning, told the Graphic Business in an interview on the sidelines of the just-ended 23rd Annual Conference of CEOs of RCBs at Ho in the Volta Region at the weekend on the theme: “Positioning Rural Banking at the Centre of the National Financial Inclusion Agenda.

He was answering questions about why the RCBs will not write off the amount locked-up, five years after government’s exercise to clean up the financial sector resulted in the non-payment of many customers including RCBs.

Mr Daning said much as the RCBs are strong, liquid and returning profits, the locked-up funds are not for the banks but are depositor’s funds which must be recovered.

“Mind you, we need to ensure that we constantly have a strong balance sheet but this debt is not making us what we intend to be as far as our balance sheets are concerned,” he said.

Backbone of SMEs

Mr Daning said the contribution of RCBs to the micro, small and medium scale enterprises (MSMEs) in the country cannot be underestimated adding that “this is the reason we need all the funds owed us to continue to lend our support to grow that sector,” he said.

He referenced the contributions of MSMEs to Gross Domestic Product (GDP) and employment generation and noted that, that was among the many reasons why the government has to find the money to settle the RCBs as soon as practicable.

Warning

During his address earlier at the conference, Mr Daning warned of looming consequences should government continue to delay in the release of locked-up funds of its members.

Since 2019, the association is still owed about GH¢500 million following the banking sector reforms which resulted in the collapse of numerous financial institutions in the country.

Much as the government has spent more than GH¢20 billion to settle some of those affected, institutions such as rural banks are still owed huge sums.

Mr Daning, said; “It is an indisputable fact that the RCBs, regardless of the difficulties posed by these locked-up funds, may be unable to demonstrate publicly.” 

However, if the case is not pursued to its logical conclusion and the funds released, considering that the withheld funds belong to our valued customers, it is likely that the consumers would take matters into their own hands, and the repercussions of their actions remain uncertain.” 

He also said: “As the adage states, “a stitch in time saves nine.” We urgently request your assistance to uphold a conducive business atmosphere at the RCBs, enabling us to continue serving our customers effectively.”

Bailout funds

Mr Daning further called on the government to prioritise the RCBs in the recent GH¢1.5 billion bailout package meant to settle outstanding locked-up capital to individuals impacted by the financial sector clean-up exercise.

He said the association was surprised to learn that GCB Capital had initiated the disbursement of monies as part of the outstanding locked-up capital to individuals impacted by the financial sector clean-up. 

“This would have been great news, were it not for the absence of any reference to RCBs in the repayment agreements,” the association said. 

Mr Daning also added: “This is particularly concerning given that the association has submitted multiple representations regarding the total overdue locked monies, which currently amount to around GH¢500 million. 

He requested for a clear timeline for the disbursement of funds to provide the much-needed relief to the struggling RCBs. 

Referring to the Ministry of Finance, he said: “We would appreciate your assistance in releasing locked-up funds to aid distressed RCBs and in providing concessional facilities via the ARB Apex Bank for the acquisition of recommended armoured vehicles to improve operating efficiency and security at all RCBs. 

This will not only benefit the RCBs in their operations but also contribute to the overall stability and growth of the financial sector.”

Government, through the Ministry of Finance, a couple of months ago, approved the release of an amount of GH¢1.5 billion to continue the bailout programme to affected investors of the failed fund management companies that had their licenses revoked in November 2019. 

According to Securities and Exchange Commission (SEC) in a statement, the total amount of GH¢1.5 billion will be released in three tranches commencing with the first tranche of GH¢700 million in August 2024, and GH¢400 million each in October 2024 and December 2024.

This GH¢1.5 billion, the commission said, is in addition to the GH¢4.46 billion previously released to affected investors with examined claims.