Restoring confidence in indigenous banks - Nduom shows the way

Ghana is currently facing major interruptions within the financial sector, culminating in scary panic withdrawals even if they do not have immediate need for the money.

The past four years have seen the folding up of a number of locally owned microfinance companies, finance houses and investment companies in the country. This has led not only to job losses but the savings and investments of many people.

When interruptions occur in the financial sector, business and social activities tend to hit road blocks and the confidence of people goes down.

All of these developments play on the minds of the people. So any hint of trouble within the financial sector, especially from the locally owned financial services, leads to a run-down on all indigenous financial institutions.

In its wake, people resort to even more risky solutions such as “under-bed banks” and unlicensed service providers.

However, efforts to deal with the liquidity crisis somewhat appear to be slow. The Bank of Ghana (BOG) and the Security Exchange Commission (SEC) are working round the clock to insist on the rules of engagement but somehow their good deeds are not known to many stakeholders.

Stop panic withdrawal

That is why the ongoing nationwide tour dubbed “Stop the Panic Withdrawal and Strengthen our Indigenous banks” by the Founder and Board Chairman of Groupe Nduom, Dr Papa Kwesi Nduom, deserves commendation.

Notwithstanding the challenges that have rocked the financial sector, his bold decision to take the bull by the horn and go to the people directly to allay their fears not to rush to cash out their monies from indigenous banks for fear of losing them is a step in the right direction.

As a major stakeholder in the financial sector, his direct engagement with customers of indigenous banks across the country not to cash out monies they do not genuinely need could go a long way to save the indigenous banks from total collapse.

The global business mogul who started his campaign tour in the Greater Accra Region last week has also been to Koforidua and Nkawkaw in the Eastern Region, Kumasi in the Ashanti Region and Sunyani, Wenchi and Techiman in the Brong Ahafo Region. Last Sunday, he was in the Central Region and will later move to the Western Region. This week, his schedule will also take him to the three northern regions.

I cannot help but applaud Dr Nduom for taking this bold initiative of restoring customers’ confidence in indigenous banks.

For championing a nationwide campaign to save our indigenous banks and economy at large, Dr Nduom has put to test President Akufo-Addo’s admonishment of the citizenry not to be spectators but to be citizens.

Ghanaians must patronise our own

Is it surprising that a greater majority of Ghanaians are unbanked? It means that a lot more Ghanaians are saving their monies in their homes. That is why every effort to reach the larger populace with some banking facility must be a welcome gesture.

What banks need to do

But the question also remains as to what our local banks have to do to win the confidence of the people.

It was clear that these institutions were mostly taking short-term deposits and investing in long-term projects. Most of them were spreading themselves too thin to an extent that they had serious liquidity challenges.

We know of some investing heavily to build media empire, a terrain that has been choked and proven to be unprofitable. They have also invested in some other projects such as real estate among other things. Small as some of them are, our local banks are spread across the length and breadth of the country. Much as this is good as part of efforts to help with financial inclusion, it is dangerous because many of these areas are unprofitable and a clear drain on the profitability of the banks.

Banking is a confidence game and, therefore, the shareholders and managers of the banks must do all in their power to ensure that confidence reposed in them is not eroded under any circumstance. While some may argue that they need to invest in other areas to create jobs, it is equally imperative for them to be mindful of the fact that depositors’ funds are not mismanaged or misapplied to create unbearable problems such as what they find themselves in today.