NIB justifies takeover of First Ghana Savings and Loans
The National Investment Bank (NIB) has justified its rationale for taking majority shares in the ailing First Ghana Savings and Loans Limited (FGSL) by saying that in spite of its financial predicament, the company has a bright future.
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According to the bank, it intends to find an easier way to reach out to small and medium-scale enterprises (SMEs) and other small businesses with facilities that will help them turn their operations around, while returning profits, to increase shareholders’ value.
The Chief Executive Officer of NIB, Mr Ernest Mawuli Agbesi, gave the justification in an interview with the bank shortly after the extraordinary annual general meeting of FGSL in Accra on May 28.
“Not all can walk into a bank to borrow money because of the demands of the banks which makes it impossible for them come in, but operating a savings and loans company will attract them”, he said.
He explained that the banks demand collaterals because of the high default rate of people taking loans and explained that the approach of the savings and loans company to loan recovery was different, adding “we will use competent staff of the company to reach out to those who take the loans to enhance their businesses”.
Mr Agbesi, who is also the Board Chairman of FGSL, said in giving out the loans, the company would put business people with common interest in groups, and give them loans, adding that this would ensure easy monitoring and easier repayment.
Mortgage Financing
On the company’s core business which is mortgage financing, Mr Agbesi made it clear that the new direction would not shift focus from mortgage financing.
“The company has a lot of properties which have been sold that people are not collecting; they have a lot of unpaid loans in their books but with this new arrangement, we will be able to collect them.”
He also said the company would team up with estate developers to provide affordable homes for Ghanaians, while returning profits on investments.
Recapitalisation
NIB will recapitalise FGSL with about GH¢12m to enable the company to meet its minimum capital requirement, as set by the Bank of Ghana, by the close of the year.
The bank will release GH¢5m each in June and August this year to FGSL, while the remaining amount of about GH¢2m will be released in the last month of the year.
With a resolution to that effect passed by the shareholders, NIB is set to own more than 90 per cent of the company, thereby making it the majority shareholder.
The move will allow the company to meet the December 31 deadline to recapitalise or face complete shutdown.
“We hope the recapitalisation will put FGSL in its rightful position in the financial industry to enable us appreciate the wealth of our investment the next time we meet here”, Mr Agbesi told the shareholders of the company.
He urged the shareholders of the company to have confidence in the management and new majority shareholders of the company as “we intend to ensure that you get paid dividends from next year when the financials normalise”.
Strategic Plan
The board has put in place a strategic plan to increase the scope of operations of FGSL to include small and medium-scale enterprises (SMEs) and other business loans in addition to its tradition of mortgage lending.
The Board Chairman used the opportunity to apologise to the shareholders for the inability of the company to pay dividends to them since 2009 and pledged the commitment of the management to ensuring that new capital would be injected into the business to turn the company around.
“With these new funds, we will be able to take up big ticket transactions and place us in a better position to compete in the market”, he said.
FGSL Financials
The total income of FGSL fell from GH¢2.8 million in 2012 to GH¢2.51m in 2013, representing a negative variance of 10 per cent. Shareholders’ funds also suffered a decline from GH¢1.30m to GH¢319,356.13 in 2013, representing -76 per cent.
The company’s income surplus also dipped from a negative GH¢2.49m in 2012 to negative GH¢3.5m in the year under review, although deposits rose by 12 per cent from GH¢10.41m in 2012 to GH¢11.6m in 2013.
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